Traders said end-users were not interested in buying base metals amid economic uncertainties following Thursday data showing Japan's gross domestic product (GDP) shrank for an unprecedented fourth quarter in July-September.

The Economic Planning Agency said its forecast of a 1.8 per cent GDP decline for the fiscal year through March may now be difficult, with several privateeconomists saying that they expect a fiscal 1998/99 GDP fall of closer to 2.5 per cent.

With the economy in tatters, traders have hardly any hope that Japanese demand for base metals, including copper, aluminium and zinc, will bounce back sharply next year after expected sharp declines of 10-20 per cent this year.

Base metal users have been hurt by the ailing automobile industry and construction sector, which saw this week another builder, medium-sized JDC Corp, seeking bankruptcy protection under the weight of its 1990s 'bubble era' debt.

"Things are extremely bad," said a copper trader at another Japanese house. "It (Japanese 1998 copper demand) will slump 15-20 per cent compared with usual years. And we can'T expect much in the first half. The rest depends on the general economy." Traders faced an uphill struggle in ongoing talks over 1999 term sales contracts for copper and zinc as many domestic users want to slash their commitments by 10-20 per cent amid high metal inventories in the internationalmarket.

Reflecting a global supply glut, the LME saw on Thursday alone a 12,850 tonne increase in copper warehouse stocks, including 6,600 tonnes entering Singapore.

Some traders speculated Japanese smelters were shipping copper to the LME warehouse in Singapore ahead of the end of the year, especially as they were unlikely to win major spot contracts during sales negotiations for 1999.

"It's not impossible that they (Japanese smelters) are delivering the metal to Singapore," said a third trader. "You can't expect to sell much at this time of the year. It's the easiest way to sell products for cash."

Meanwhile, a spokesman at Mitsubishi Materials Corp said the company planned to start commercial operation of the Gresik smelter in Indonesia, jointly owned by Freeport-McMoRan Copper & Gold Inc, by the end of December as scheduled.

An industry source denied persisting market speculation that Mitsubishi Materials would market in Japan part of 1999 Gresik mine output of about 140,000 tonnes, despite itsplan to close its Naoshima refinery for maintenance around April. "We're not thinking of bringing the metal to Japan, though Indonesia would buy only 40,000 tonnes at most," the source said. "We're awash with copper in Japan. We plan to sell it to neighbouring countries, like Taiwan, Singapore or Malaysia."

On LME trade, Japanese traders said they were unlikely to build large short positions, other than necessary for their hedging operations, in LME aluminium, despite market talk they were behind a squeeze emerging in December and January contracts.