Copper Erases Gain Before U.S. Manufacturing Report; Lead Drops

By Claudia Carpenter

Oct. 1 (Bloomberg) -- Copper erased gains in London before the release of U.S. economic reports that may add to signs of slumping growth from manufacturers that use the metal in wires and pipes. Lead also dropped.

U.S. manufacturing probably shrank at a faster pace in September and construction spending in August probably declined, economists said before the reports today. U.K. manufacturing contracted at the fastest pace in 16 years and European manufacturing contracted more than initially estimated.

``The data is still confirming recession fears,'' said Eugen Weinberg, an analyst at Commerzbank AG in Frankfurt. ``In a normal situation, copper will do badly in a recession because it's an industrial metal.''

Copper for delivery in three months fell $25, or 0.4 percent, to $6,335 a ton as of 1:42 p.m. on the London Metal Exchange. Futures for delivery in December dropped 2.55 cents, or 0.9 percent, to $2.8535 a pound on the Comex division of the New York Mercantile Exchange.

Prices had gained on speculation a strike at Xstrata Plc, the world's fourth-largest producer, will curb output. The U.S. Senate also set a vote for tonight on a $700 billion financial rescue plan. According to Weinberg, ``everybody is asking will the U.S. financial package help the real economy?''

Markit Economics's European manufacturing index dropped to 45 in September from 47.6 in August. In the U.K., the Chartered Institute of Purchasing and Supply's index of manufacturing retreated to 41 in September from 45.3 the previous month.

Xstrata Strike

Ontario workers began a strike at Xstrata's Kidd Creek on issues, including benefits. The plant produced 163,130 metric tons of copper concentrate last year.

Kidd Creek ``is a reasonably significant operation,'' said Dan Smith, an analyst at Standard Chartered Plc in London. ``A lot of markets have been really hammered in the last month and the fundamentals have not deteriorated that much.''

Prices last month fell 15 percent, the most since June 1996.

``It's difficult to be bullish but nevertheless the worst might be over for the time being,'' said Smith. ``We're working with the assumption that the financial bailout in the U.S. goes through and therefore there will be more confidence.''

Aluminum rose $2 to $2,427 a ton, lead dropped $5 to $1,825 a ton, nickel jumped $500 to $16,350 a ton and zinc rose $14.75 to $1,694.75 a ton. Tin for delivery in three months advanced $475 to $17,675 a ton.

To contact the reporter on this story: Claudia Carpenter in London at ccarpenter2@bloomberg.net or ccarpenter2@bloomberg.net