By Chanyaporn Chanjaroen Oct. 10 (Bloomberg) -- Copper headed for its biggest weekly rout in 22 years in London on concern that a global recession will sap demand for metals. Lead tumbled the most since at least 1987 and zinc posted the biggest daily drop in 11 years. Copper has shed 21 percent this week, the steepest drop since at least April 1986. The MSCI World Index of equities has lost almost the same amount. French industrial output declined in August, adding to evidence the second-largest economy in the euro zone probably slipped into recession in the last quarter. ``Metals prices are discounting a severe recession/depression,'' said Robin Bhar, a London-based metals analyst at Calyon. ``The real problem is nobody knows what's going on, that's why no one is lending or buying.'' Copper for delivery in three months fell as much as $745, or 14 percent, to $4,570 a metric ton, the biggest one-day decline since October 2004. The contract traded down 9.3 percent at $4,820 as of 4:09 p.m. on the London Metal Exchange. Lead fell as much as 17 percent to $1,375 a ton, most since at least 1987. The London Metal Exchange index including copper, lead and zinc slumped 21 percent this year, compared with a 17 percent loss in the S&P GSCI index of 24 raw materials and a 38 percent drop in the Standard and Poor's 500 index. The rout dragged down miners including BHP Billiton Ltd., the world's largest, which has seen its market value plunge 37 percent this year. ``The deteriorating macro environment, the possibility of modest surplus in 2009 and 2010 and the fact that the copper price is much further above costs of production than other metals taken together make an unattractive mix,'' Nick Moore and other analysts at RBS Global Banking & Markets in London said in a report today. Copper Consumption Copper output will outpace consumption by 277,000 tons next year, from 109,000 tons this year, the Lisbon-based International Copper Study Group said Oct. 8. ``Not only may global usage be reduced by a global economic downturn, but also credit constraints and altered feasibility analyses could reduce or delay expected new production,'' the government-backed group said. Copper stockpiles jumped 59 percent to 25,681 tons this week, the Shanghai Futures Exchange said today. Including metal inventories monitored by the LME and the Comex division of the New York Mercantile Exchange, they total 234,206 tons, or 4.6 days of global consumption, according to Bloomberg calculations. Last year's average was 4.9 days. The implied volatility of copper for immediate delivery was at 57 percent on Oct. 8, the highest since June 2006. The reading was 56 percent yesterday. Aluminum Drops Aluminum fell as much as $115, or 5 percent, to $2,190 a ton, the lowest since 2005. Lower prices, combined with weaker demand, is forcing Aluminum Corp. of China Ltd., the country's largest producer of the metal, to consider suspending some higher-cost operations. Nickel slipped as much as $2,400, or 18 percent, to $11,000 a ton, the lowest since October 2004 and tin dropped $1,750, or 12 percent, to $13,000 a ton. Zinc declined $227, or 15 percent, to $1,270 a ton and lead fell $182, or 11 percent, at $1,482 a ton, the lowest since November 2006. To contact the reporter on this story: Chanyaporn Chanjaroen in London at cchanjaroen@bloomberg.net

Source