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Copper slumps 14 pct on deepening recession fears

Reuters - Saturday, October 11

* Recession, liquidity fears dog base metals markets

* Copper reaches lowest point since January 2006

* Aluminium slides to lowest since December 2005

By Carole Vaporean and Michael Taylor

NEW YORK/LONDON, Oct 10 - Copper slumped 14 percent on Friday to its lowest level in close to three years in a commodities-wide sell-off triggered by deepening worries over the prospect of a global recession.

Copper <MCU3> for three-months delivery on the London Metal Exchange plummeted to $4,570 a tonne, its lowest level since January 2006 and its biggest one-day fall in electronic trading in both absolute and percentage terms since at least February 2001, according to Reuters data.

In New York, copper for December delivery <HGZ8> finished with heavy losses of 26.15 cents, or down 10.87 percent to $2.1445 a lb on the New York Mercantile Exchange's COMEX division. The session range extended to $2.05, its lowest level since early January 2006, on a continuation contract basis.

Prices for the metal, used in power and construction, have fallen 46 percent since a record high of $8,940 in July.

"It's panic. It's fear of the unknown," said Calyon analyst Robin Bhar. "This has gone from the financial markets stage to the real economy."

"People are selling at any number just to get out and doing something just to get cash," a New York metals trader said.

He added that while he thinks copper will eventually turn up again at some point, there was no way to know when and what may happen in the meantime.

Noting that the last two weeks on the copper chart portray a price that falls straight down, one veteran trader said, "What's happened over that last few days is just plain scary. I've never seen anything like it."

The United States, Europe and Asia saw panic selling of shares on Friday, knocking benchmark world equity indexes to a five-year troughs on fears that policymakers were not making enough effort to contain the financial crisis. [ID:nSP146183]

"The banking sector problem is now spilling over into other sectors," said Michael Lewis, global head of commodities research at Deutsche Bank. "It's obviously quite a powerful negative demand shock. Copper does look the most exposed."

Copper is now very close to $4,000, the average cost of production, according to some analysts. Others say average costs are just above $3,000 a tonne.

Data showing a 59 percent surge in copper inventories at warehouses monitored by the Shanghai Futures Exchange also hit sentiment. [ID:nBJD000372]

Order intake for consumers of metal and other commodities has dried up in the last couple of weeks, Bhar said.

"People have pulled orders and in terms of business it has ground to a halt," he said.

SOMBRE PICTURE

Aluminium <MAL3> tumbled 6.8 percent to $2,150 a tonne, its lowest since December 2005, a loss of more than 35 percent since an all-time high of $3,380 on July 10. The metal used in transport and packaging has come under pressure in recent weeks on deteriorating car sales data.

Analysts said energy-heavy aluminium had broken through its average cost of production floor, but would not give a figure because of power cost fluctuations. Energy is estimated to account for up to 45 percent of aluminium smelting costs.

"It's a very, very sombre picture," Stephen Briggs, commodity strategist at RBS global Banking & Markets. "There is only one game in town -- economic meltdown."

Government and central bank action to break the gridlock in credit markets, shore up banks and stave off economic recession has failed to steady financial markets.

Finance ministers and central bankers from the Group of Seven nations gathered in Washington on Friday to devise a strategy to end panic selling in financial markets. [TOPWRAP]

Many of those who had thought China, the world's largest consumer of copper and aluminium, would offset falling demand elsewhere have now revised that stance.

Proof that China is not immune came as the country's business confidence index fell sharply in the third quarter to 123.8 points, down from 134.8 in the second. [ID:nPEK103082]

Stainless steel making raw material nickel <MNI3> plummeted 17.9 percent to $11,000 a tonne, the lowest since May 2004. It was last at $12,175 from $13,400 at the close on Thursday.

Battery material lead <MPB3> slipped 17 percent to $1,375, its lowest since October 2006. It ended at $1,475 from $1,660.

Zinc <MZN3> fell 15.2 percent to $1,270, the lowest since August 2005. The metal used to galvanise steel ended at $1,440 from $1,498.

Tin <MSN3> tanked 13 percent to $13,000, the lowest since April 2007 and was closed at $14,050 from Thursday's last bid at $14,750. Metal Prices at 1623 GMT Metal Last Change Pct Move End 2007 Ytd Pct move LME Cu 4845.00 -470.00 -8.84 6670.00 -27.36 SHFE Cu* 43890.00 -1830.00 -4.00 56880.00 -22.84 LME Alum 2225.00 -82.00 -3.55 2403.00 -7.41 SHFE Alu* 13490.00 -675.00 -4.77 18180.00 -25.80 COMEX Cu** 218.25 -24.15 -9.96 303.50 -28.09 LME Zinc 1420.00 -78.00 -5.21 2370.00 -40.08 SHFE Zinc* 11825.00 -460.00 -3.74 18950.00 -37.60 LME Nick 12050.00 -1350.00 -10.07 26350.00 -54.27 LME Lead 1475.00 -185.00 -11.14 2550.00 -42.16 LME Tin 13750.00 -1000.00 -6.78 16400.00 -16.16 ** 1st contract month for COMEX copper * 3rd contact month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07 (Reporting by Michael Taylor; additional reporting by Carole Vaporean in New York; Editing by Marguerita Choy)

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