LONDON, Jan 8 - Copper prices extended last week's heavy losses on Monday as rising stocks in London Metal Exchange warehouses heightened worries about a slowdown in demand.
Copper futures for delivery in three months ended the kerb at $5,606 per tonne, down $5 from Friday's close, after touching an intra-day low of $5,430 which was down 3.2 percent and a fresh nine-month low.
On Friday it closed at $5,611, after falling by more than 2 percent.
At the New York Mercantile Exchange's COMEX division, copper for March delivery settled down 0.70 cent at $2.5280 a lb, after sinking to an overnight low at $2.47, its cheapest since early April. The session high reached $2.5895.
The fall in copper dragged other metals down with the notable exception of aluminium which firmed on support from a reshuffle by the second-largest commodity fund.
Three months aluminium closed at $2,618, up $8.
The Dow Jones AIG index with some $30 billion in assets was adjusting this year's holdings and while this supported aluminium, the worst performer in 2006, it put pressure on zinc and nickel. [ID:nL02923885]
"Aluminium is a large market and not that easy to push ... it may be helped by the re-weighting," an LME floor trader said.
In addition, aluminium's cash to three months backwardation was $52/62 at the close after earlier flaring out to $57, its highest level since October 2004, indicating that demand for nearby material was strong.
Zinc ended the day down $190 at $3,720, down 4.9 percent from its close at $4,085 on Friday, when the metal dipped by a similar amount.
"Most people watch nickel as the Dow Jones AIG is expected to sell out a large chunk," another LME floor trader said.
Nickel was down 5.1 percent at $31,400, versus $33,100 in the previous session.
The fund, tracking 19 physical commodities futures, is seen to reduce those commodity contracts that have appreciated in value during 2006, with zinc and nickel gaining around 200 percent and 150 percent respectively, while increasing the weight of the past year's underperformers, like aluminium.
"The largest impact will be to nickel and zinc holdings which will be cut by about half although other metal weightings are little changed," analyst Robin Bhar at UBS said in a note.
COPPER SEEN LOWER
Copper has lost around 14 percent since the start of the year and the metal could easily go lower, traders said.
"There is more commodity fund selling and prices look likely to go below $5,000," a third LME floor trader said.
A Macquarie report said prices would inevitably bounce back as most metals were oversold, but in the short term prices were seen drifting to around $5,000.
Copper's recent fall has come against a backdrop of worries about slowing global growth prospects and rising supply of many key industrial commodities.
Stocks in LME-registered warehouses, seen as a gauge of demand, had risen by more than 12,000 tonnes over the past week.
Another 900 tonnes entered stores on Monday, taking the total to 195,775, the highest since March 2004.
Analysts said the market might change direction in mid-February, when the Chinese were likely to re-stock.
"Chinese New Year on 18th February should see new buying interest from consumers in both physical copper and copper concentrates," John Meyer at Numis Securities said in a note.
At the same time, traders said there was talk the Chinese had lowered their purchasing targets in copper.
"So maybe we will see less support than people hope and it could easily drift down lower fairly quickly," the trader said.
Goldman Sachs said prices could go higher again at the end of 2007 as global growth would pick up.
"While prices in the interim are likely to remain volatile, we continue to believe that prices will see renewed up
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