Copper falls for day 2 on supply fears

Copper today fell for the second day in London on speculation that supply of the metal used in pipes and wires would beat demand this year.

Credit Suisse, Switzerland's second-biggest bank, cut its 2007 price forecast for copper by 13 per cent, New York-based analysts led by David Gagliano wrote in a report yesterday.

Copper will have a production surplus of 1,80,000 tonne this year because of recent destocking of the metal, particularly in China, Credit Suisse said, reversing an earlier forecast for a 50,000 tonne deficit.

"The recent price rally has been based on the hope that the Chinese would return in a big way and restock their inventories," Stephen Briggs, a London-based analyst at Societe Generale, said today, adding "but investing on that hope is a dangerous idea". Copper for delivery in three months on the London Metal Exchange dropped $65, or 1 per cent, to $6,225 a tonne in early morning trade.

Aluminium fell on speculation that growing stockpiles would lead supply to exceed demand for the metal this year. Global production would beat demand by 1,42,000 tonne, Credit Suisse said in a report yesterday.

Inventories monitored by the LME rose for the seventh day by 12,475 tonne, or 1.6 per cent, to 7,96,800 tonne, the exchange said in a daily report. Aluminium stockpiles have gained 14 per cent this year to the highest since August 2004.

"It is clear that there has been a major effort in recent weeks to push aluminium prices up through the psychologically important $3000,'' said John Kemp, an analyst at Sempra Metals, one of the 11 companies trading on the LME floor. "Investors' resolve will be tested in the coming weeks unless the physical market turns around soon," he added. Aluminium declined $45, or 1.6 per cent, to $2,850 a tonne.

Among other LME-traded metals, nickel fell $700, or 1.7 per cent, to $40,600 a tonne after trading at a record for the second consecutive session yesterday.

Lead also slipped after trading at a record for the seventh straight day yesterday, falling $40 to $1,900. Zinc fell $50 to $3,550 and tin rose $150, or 1.1 per cent, to $13,625.