Copper Plunges to Lowest in 18 Months as Manufacturing Slows

By Claudia Carpenter

Oct. 1 (Bloomberg) -- Copper declined to the lowest in 18 months on signs that a manufacturing slump is eroding demand for metal used in wires and pipes. Lead also dropped.

The Institute for Supply Management's factory index dropped last month to 43.5, the lowest since October 2001, the Tempe, Arizona-based group said today. In the U.K., manufacturing contracted at the fastest pace in 16 years last month while the activity shrank more than first estimated in the rest of Europe.

``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 futures for December delivery fell 8.95 cents, or 3.1 percent, to $2.7895 a pound on the Comex division of the New York Mercantile Exchange. Futures earlier touched $2.749, the lowest for a most-active contract since March 7, 2007. Copper plunged 15 percent last month, capping a 26 percent drop in the third quarter.

On the London Metal Exchange, copper for delivery in three months fell $200, or 3.1 percent, to $6,160 a metric ton ($2.79 a pound).

Prices had gained on speculation a strike at Xstrata Plc, the world's fourth-largest producer, will curb output. The U.S. Senate is also set for 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. A reading below 50 in the ISM's U.S. index indicates a contraction.

Xstrata Strike

Ontario workers began a strike at Xstrata's Kidd Creek on labor issues including benefits. The plant produced 163,130 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 on the LME 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,'' Smith said. ``We're working with the assumption that the financial bailout in the U.S. goes through and therefore there will be more confidence.''

Aluminum dropped $13, or 0.5 percent, to $2,412 a ton on the LME, and lead fell $90, or 4.9 percent, to $1,740. Nickel jumped $100, or 0.6 percent, to $15,950 a ton, zinc slid $12, or 0.7 percent, to $1,668 a ton, and tin advanced $350, or 2 percent, to $17,550 a ton.

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