By Anna Stablum July 17 (Bloomberg) -- Copper fell in London as a further drop in metal booked for removal from warehouses stoked concern that prices climbed too high to reflect demand. Aluminum rose to the highest in more than seven months. So-called canceled warrants, or metal earmarked for delivery from stockpiles monitored by the London Metal Exchange, slid for a fifth day today and have plunged 43 percent this week, daily LME figures showed. Canceled warrants for copper have shrunk to 2.8 percent of total LME inventories from 21 percent at the start of May. “Canceled warrants have been instrumental in supporting the recovery story for copper this year,” Eugen Weinberg, an analyst at Commerzbank AG in Frankfurt, said by phone. “Copper should correct because demand is less than supply, Chinese strategic purchases are over and there is too much optimism.” Copper for three-month delivery slid $50, or 1 percent, to $5,210 a metric ton at 10:30 a.m. on the LME. The contract has added 7.2 percent this week, heading for its first gain in three weeks and the biggest advance since March. Copper for September delivery dropped 0.7 percent to $2.373 a pound on the New York Mercantile Exchange’s Comex division. Aluminum advanced as much as 1.1 percent to $1,714 a ton, the highest since Dec. 2. The contract was recently down $5, or 0.3 percent, at $1,690 a ton. Chinese Demand Copper has advanced 70 percent this year in London, bolstered by demand from China, the world’s largest copper consumer. Imports into the Asian nation of copper and related products climbed to a record 475,999 tons in June. “A potential slowdown in Chinese import buying is the single biggest risk to metals prices, but there is still very little sign of that developing,” Gayle Berry, an analyst at Barclays Capital in London, said in a report yesterday. Calyon, Credit Agricole SA’s investment-banking unit, raised its forecast for this year’s copper price. The metal will average $4,315 a ton, 4.2 percent more than its prior estimate of $4,140, the bank said yesterday in an e-mailed report. China’s gross domestic product expanded by 7.9 percent in the second quarter, beating the 7.8 percent median forecast of 20 economists in a Bloomberg survey, data showed yesterday. The Asian country is the only one of the 10 biggest economies that is expanding, highlighting the role China may play in easing the worst global recession since the Great Depression. The U.S. economy is still shrinking, five months after Congress agreed to President Barack Obama’s $787 billion stimulus package. Copper Backwardation The copper market moved into so-called backwardation this week for the first time since May 1 as metal for nearby delivery traded at a premium to three-month copper, indicating scarce supplies. The spread narrowed to $10.50 yesterday from $11.50 on the previous day. LME copper inventories increased 1.3 percent to 264,150 tons today. Shanghai copper stockpiles fell for a second week, declining by 1.6 percent, the Shanghai Futures Exchange said in a report on its Web site. Inventories decreased 884 tons to 53,283 tons. Among other LME metals for three-month delivery, tin slipped 0.2 percent to $13,000 a ton. The premium for near-month delivery metal over three-month prices narrowed to $103 a ton yesterday after surging to $160 a ton on July 15. Nickel fell 0.4 percent to $16,039 a ton, lead rose 0.3 percent to $1,624 a ton, and zinc declined 0.7 percent to $1,540 a ton. To contact the reporter on this story: Anna Stablum in London at astablum@bloomberg.net

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