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2 October 2008
Dollar drags down copper, aluminium at 31-mth low

* Dollar rally forces copper to a fresh 19-month trough
* Aluminium hits 31-month low on poor U.S. car data
* Metals hit multi-month lows in wider commodity sell-off

Copper hit a fresh 19-month low on Thursday as the dollar rallied while aluminium fell to a 31-month trough on the deteriorating health of the car industry.

Zinc fell to a near three-year low, nickel hit the lowest since April 2006 and tin dropped to an 8-month trough together with sharp falls in precious metals and oil.

Aluminium for delivery in three months on the London Metal Exchange ended at $2,301 a tonne, down 4.6 percent from $2,412 at the close on Wednesday.

Earlier the metal used intensively in vehicle manufacturing and in packaging touched $2,300 -- the lowest since March 2006.

Copper closed down 5 percent at $5,850 from Wednesday's $6,160 -- the lowest since early March 2007.

"The dollar is making an amazing move at the moment -- it is one of the key reasons why the market has turned around," said analyst Dan Smith at Standard Chartered.

"We have also seen the data for U.S. car sales which is extremely negative for aluminium."

In early trade, copper rose 1.8 percent to $6,270 after the U.S. Senate approved a revised rescue plan for the financial markets.

The market was awaiting the House of Representatives' vote on the $700 billion dollar package, which was expected by Friday.

Major commodity indexes suffered double-digit declines in percentage terms last month, as the financial crisis triggered falls across the commodity spectrum.

A firmer U.S. currency also weighed, making dollar-priced commodities more expensive for holders of other currencies.

"It's the currency and people are worried about the stock markets and financials," an LME trader said.

The dollar index touched a near 13-month high as the euro dropped on comments from European Central Bank President Jean-Claude Trichet that euro-zone inflation risks had diminished.

SLUGGISH DEMAND PICTURE

Major automakers reported sharper-than-expected falls in U.S. sales for September.

"Auto makers are major consumers of aluminium and the outlook for this sector in the United States looks very bad. Inventories are rising and people are focusing on oversupply," Barbara Lambrecht, analyst at Commerzbank, said.

Top automakers, including General Motors Corp (GM) and Ford , warned of tough times at the Paris Auto Show.

In copper, concern about demand from the construction and power industries has eroded confidence, as have expectations of slower demand growth in China, the world's largest consumer.

The second largest copper consumer, the United States, will likely suffer a sharp economic downturn, or even recession, judging by the impact of similar banking crises around the globe over the past 30 years, the International Monetary Fund said.

New orders at U.S. factories tumbled by an unexpectedly steep 4 percent in August, the sharpest contraction since October 2006, a government report showed.

Copper shrugged off a strike at Freeport-McMoRan's Cerro Verde, the third-largest copper mine in Peru.

"Nobody cares that much about strikes at the moment," Standard Chartered's Smith said.

Smith said the problem for copper was that prices were still historically high, whereas other markets such as lead and zinc had limited downside with prices nearing the cost of production.

Copper was below $5,000 a tonne before 2006, but the metal is more than 30 percent away from its record of $8,940 in July.

Zinc closed at a trough of $1,580 a tonne, the lowest level since Nov. 2005 and down 5.3 percent against $1,668.

Nickel closed at $15,300, the lowest level since April 2006 and down $650, or 4.1 percent, since Wednesday.

Lead dropped to a two-month low of $1,681 before closing at $1,700, down $40 from Wednesday's close.

Tin ended at $16,735, down 4.6 percent from Wednesday's close of $17,550. Earlier it hit $16,450, the lowest point since February this year.

Metal Prices at 1635 GMT Metal Last Change Percent Move End 2007 Ytd Percent

move LME Cu 5860.00 -300.00 -4.87 6670.00 -12.14 SHFE Cu* 53360.00 -80.00 -0.15 56880.00 -6.19 LME Alum 2300.00 -112.00 -4.64 2403.00 -4.29 SHFE Alu* 15620.00 110.00 +0.71 18180.00 -14.08 COMEX Cu** 269.85 -9.85 -3.52 303.50 -11.09 LME Zinc 1575.00 -93.00 -5.58 2370.00 -33.54 SHFE Zinc* 14240.00 -25.00 -0.18 18950.00 -24.85 LME Nick 15225.00 -725.00 -4.55 26350.00 -42.22 LME Lead 1700.00 -40.00 -2.30 2550.00 -33.33 LME Tin 17000.00 -550.00 -3.13 16400.00 3.66 ** 1st contract month for COMEX copper * 3rd contact month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07 – Forbes