Copper Price Drops to 3-Year Low on Concern Demand May Decline

By Millie Munshi

Oct. 22 (Bloomberg) -- Copper fell for a third day, tumbling to the lowest price in almost three years, on concern that a global economic slowdown will slash consumption of the metal used in pipes and wires.

Equities slid in Asia and Europe and commodities dropped, led by declines in energy futures, as a global financial crisis threatened to tilt the world economy into recession. Copper plunged 7.9 percent in the first two sessions of this week on signs of faltering demand.

Traders ``the world over are enveloped in fear of the economy,'' Alex Heath, the London-based head of industrial- metals trading at RBC Capital Markets, said today in a report. ``Fear will hold you back.''

Copper futures for December delivery fell 10.5 cents, or 5.2 percent, to $1.902 a pound at 9:26 a.m. on the Comex division of the New York Mercantile Exchange. Earlier, the price touched $1.891, the lowest for a most-active contract since Nov. 28, 2005.

A stronger U.S. currency is also weighing on copper, Heath said. Commodities, mostly traded in dollars, usually move in the opposite direction of the currency as traders use raw materials to hedge against inflation.

The U.S. Dollar Index, a basket of six major currencies that includes the euro and yen, gained as much as 2.3 percent today. The index touched the highest since Nov. 6, 2006.

Copper has plummeted as much as 55 percent from a record $4.2605 on May 5. Slowing economies in China and the U.S., the world's two biggest copper consumers, will keep driving down prices, Walter `Bucky' Hellwig, who manages $30 billion at Morgan Asset Management in Birmingham, Alabama, said yesterday in an interview.

On the London Metal Exchange, copper for delivery in three months dropped $294, or 6.5 percent, to $4,204 a metric ton ($1.91 a pound).

To contact the reporter on this story: Millie Munshi in New York at mmunshi@bloomberg.net.