Copper, Aluminum, Zinc Drop as Europe Crisis May Sap Demand

SHANGHAI, May 19 -- Copper dropped, snapping a rebound from a three-month low, and aluminum and zinc fell on concern Europe's debt crisis may worsen, reducing demand for raw materials. Lead, nickel and tin also fell.

Three-month delivery copper on the London Metal Exchange slumped as much as 3.4 percent to $6,470 a metric ton and traded at $6,595 at 11:03 a.m. in Shanghai. Aluminum fell 1.3 percent to $2,026 per ton and zinc lost 1.6 percent to $1,908 per ton.

"There may be short-lived rebounds now and then for some metals but the big downtrend is not over yet against the macro backdrop," Zhu Mingyuan, an analyst at Xiangyu Futures Co., said from Shanghai. "Traders may rush to sell their stocks at any rebound as their confidence is shaken."

U.S. equities tumbled yesterday and China's shares fell today after Germany's move to ban some speculative investments sparked concern that Europe's debt crisis is worsening. The euro slid to its weakest since April 2006 today and the dollar extended its gains as traders sought an investment refuge.

The Reuters/Jefferies CRB Index of 19 commodities dropped to a seven-month low yesterday on speculation European efforts to curb government debt will erode economic growth and China may step up measures to reduce asset bubbles.

Copper for August delivery in Shanghai slumped as much as 3.6 percent to 51,820 yuan ($7,590) a ton and last traded at 53,160 yuan. Zinc dropped as much as 5.5 percent to 14,830 yuan.

China Home Sales

Sales of new homes in Shanghai dropped 16 percent to a five- year low last week after China raised minimum mortgage rates, restricted pre-sales by developers and tightened controls on purchases of second and third properties.

The measures "may not have immediate impact on metals demand but are set to dampen sentiment," Yu Ye, an analyst at Minmetals Star Futures Co. said from Shenzhen.

Aluminum fell as much as 3 percent to 14,770 yuan in Shanghai and last traded little changed at 15,220 yuan.

China, the world's largest producer of the lightweight metal, has halted discounted power sales to smelter operators and other major industries to help conserve the nation's energy and resources.

"Higher production costs can barely lend support to aluminum prices due to surplus output," Yu said. Aluminum inventories monitored by the Shanghai exchange climbed to their since at least 2003 last week.

Among other London metals, lead slumped 2 percent to $1,799 a ton, tin fell 1.3 percent to $17,275 a ton and nickel lost 3.2 percent to $21,450 per ton.