Copper Futures Fall to Lowest Since July 2005 on Demand Slides

By Millie Munshi

Nov. 20 (Bloomberg) -- Copper prices tumbled to the lowest since July 2005 on signs that the global recession is deepening, eroding demand for industrial metals.

First-time claims for U.S. unemployment insurance rose last week to the highest level since 1992, the Labor Department said today. More than $32 trillion has been erased from the value of global equities this year as the U.S., Japan and some European nations fell into recession. Copper has plunged 63 percent from a record in May.

``The outlook for the global economy has declined rapidly in the past few weeks, increasing expectations of a protracted and severe downturn,'' Alex Heath, the London-based head of industrial metals at RBC Capital Markets, said in a report. ``The market is bracing itself for further weakness.''

Copper futures for March delivery dropped 2.95 cents, or 1.8 percent, to $1.58 a pound on the Comex division of the New York Mercantile Exchange. Earlier, the price touched $1.552, the lowest since July 15, 2005.

A rout in commodity prices today sent the Reuters/Jefferies CRB Index of 19 raw materials down more than 50 percent from a record in July. The gauge touched the lowest since July 2003.

Traders are selling metals, grains and energy on concern that demand won't rebound ``for some time,'' said Michael Pento, who helps oversee $1.5 billion at Delta Global Advisors in Holmdel, New Jersey.

`Appetite Disappeared'

``Commodities are getting killed because the appetite for these things has completely disappeared,'' he said.

Consumption of raw materials including copper has plunged as much as 30 percent this quarter from a year earlier, according to Sanford C. Bernstein Ltd. Supplies of the metal exceeded demand by 26,800 metric tons this year through September, the World Bureau of Metal Statistics said yesterday.

Production will continue to outpace demand next year, analysts at JPMorgan Chase & Co. said yesterday in a report. Copper may decline more than other industrial metals because 90 percent of mines are still running profitably, making production cuts less likely, the bank said.

``Copper stands out as potentially offering more downside in prices should demand remain weak and supply remain robust,'' bank analysts said. ``Prices are likely to trade lower.''

On the London Metal Exchange, copper for delivery in three months declined $110, or 3.1 percent, to $3,480 a metric ton ($1.58 a pound).

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