Copper Tumbles, Capping Worst Week Since 1988 as Outlook Dims

By Millie Munshi

Oct. 10 (Bloomberg) -- Copper tumbled 11 percent and capped its worst week in two decades on concern that the deepening financial crisis may choke global growth and commodity demand.

Copper has plunged 20 percent this week, the biggest drop since at least 1988, when the data begins. Tightening credit markets and tumbling equities have reduced investor confidence and spurred speculation that the world economy will sink into recession. The Standard & Poor's 500 Index of shares is heading for its biggest weekly decline ever, losing 23 percent.

``People are scared to death,'' said Michael K. Smith, president of T&K Futures & Options in Port St. Lucie, Florida. ``The fear of a global recession is really hitting copper. People are worried about demand destruction. There's plenty more downside to go.''

Copper futures for December delivery fell 26.15 cents to $2.1445 a pound on the Comex division of the New York Mercantile Exchange, after earlier touching $2.05, the lowest since Jan. 6, 2006.

Last week's drop was 13 percent, the second-biggest decline on record.


Copper has lost about half of its value since touching a record $4.2605 a pound on May 5. The losses have come as the U.S. housing slump deepened. Builders are the biggest users of the metal, accounting for about 46 percent of demand, according to the Copper Development Association.

Demand has fallen ``a lot, with everything that's going on in the construction industry,'' said Jay Richman, owner of E.W. Berger & Brothers Inc., a distributor of plumbing supplies in Weehawken, New Jersey.

Rising Inventories

Copper-tube mills may have rising inventories as use has dropped, said Richman, who buys about 10,000 pounds of the metal a month for plumbers, housing authorities and industrial users.

Morgan Stanley cut its 2009 copper forecast by 22 percent this week, citing an extended ``period of demand weakness for commodities.'' The metal will average $3.20 a pound next year, analysts at the bank estimate.

On the London Metal Exchange, copper for delivery in three months dropped $525, or 9.9 percent, to $4,790 a metric ton ($2.17 a pound).

``We believe copper remains increasingly exposed in an environment of weakening growth and falling equity markets,'' Deutsche Bank AG analysts said in a report today. The price could fall to as low as $3,900 a ton in London, the bank said.

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