Oct. 16 (Bloomberg) -- Copper prices fell as rising inventories signaled demand may be slipping for the metal used in pipes and wires.

Inventories tallied in Shanghai rose 12 percent this week. Stockpiles monitored by the London Metal Exchange today climbed to the highest level in five months. Copper output will exceed consumption this year because demand is “not that strong,” said Jose Pablo Arellano, the chief executive officer of Chile’s state-owned Codelco, the world’s biggest producer of the metal.

“We had some significant stock builds this week, and that is muting the upside for copper,” said Michael Gross, an OptionSellers.com trader in Tampa, Florida. “We don’t have the kind of demand we’d need to see a bull market.”

Copper futures for December delivery declined 1.35 cents, or 0.5 percent, to $2.8455 a pound on the New York Mercantile Exchange’s Comex unit. The price rose 0.3 percent this week.

Traders have been closely following the dollar’s fluctuations to gauge the inflation outlook, Gross said. Some investors buy commodities to preserve purchasing power when the dollar weakens and sell when it gains.

The U.S. Dollar Index, a gauge of the greenback’s strength against six major currencies, rose as much as 0.6 percent, halting a four-day slump.

“Over the last few days, the dollar has been supportive for base metals,” said Eliane Tanner, a Credit Suisse Group AG analyst in Zurich. “We see prices going lower, as inventories have been rising and Chinese imports in general have been trending lower.”

China Demand

Record first-half imports by China helped prices to double this year. Shipments fell in July and August before rebounding in September. Demand may slow because rebuilding of inventories by manufacturers will end, Citigroup Inc. said in a report.

“We forecast more-subdued copper-demand growth of 5 percent in 2010, given excess inventory build,” Citigroup said.

BHP Billiton Ltd., the world’s biggest mining company, said output at its Spence copper pit in Chile is continuing at a “slower rate” after a strike that began earlier this week.

Copper for delivery in three months fell $59, or 0.9 percent, to $6,230 a metric ton ($2.83 a pound) on the LME.

Aluminum, nickel and lead also fell in London. Tin and zinc prices rose.

To contact the reporters on this story: Anna Stablum in London at astablum@bloomberg.net; Millie Munshi in New York at mmunshi@bloomberg.net.

Last Updated: October 16, 2009 14:56 EDT