BLBG: Copper Falls to Lowest Since July 2005 on Recession Concerns
By Millie Munshi
Dec. 3 (Bloomberg) -- Copper prices fell to the lowest since July 2005 on mounting concern that the global recession will slash demand for the metal used in pipes and wires.
Freeport-McMoRan Copper & Gold Inc., the world’s largest publicly traded copper producer, suspended its dividend and will reduce output in the next two years. The price of the metal has plunged as much as 64 percent from a record above $4.25 a pound in May. Today, the Reuters/Jefferies CRB Index of 19 raw materials touched the lowest level since November 2002.
Copper may drop to $1 a pound as consumption wanes, said Gijsbert Groenewegen, a fund manager at Gold Arrow Capital Management in New York. “Copper is not going to turn around anytime soon.”
Copper futures for March delivery tumbled 3.85 cents, or 2.4 percent, to $1.562 a pound at 11:45 a.m. on the Comex division of the New York Mercantile Exchange. Earlier, the price touched $1.516, the lowest for a most-active contract since July 7, 2005.
More than $31 trillion has been erased from the value of global equities as the collapse of the U.S. subprime mortgage market sparked financial turmoil. Copper inventories monitored by the London Metal Exchange have more than doubled since June 30.
‘Deep Recession’
“The financial crisis has spread just about everywhere, and we’re seeing global problems,” said William O’Neill, a partner at Logic Advisors in Upper Saddle River, New Jersey. “Copper demand is going to continue to slow down.”
The Institute for Supply Management’s index of non- manufacturing businesses, which make up almost 90 percent of the U.S. economy, fell to 37.3 in November, the group said today. That marked the lowest level since records began in 1997. Readings below 50 signal contraction.
“The ISM number doesn’t just say we’re in a recession,” O’Neill of Logic Advisors said. “It says we’re in a deep recession. Just about every economic number we see, not just in the U.S. but globally, is pointing to a prolonged downturn.”
The shares of Freeport, based in Phoenix, plunged as much as 22 percent to $17.01. The stock climbed to a record $127.24 on May 21. Copper reached an all-time high of $4.2605 on May 5. The metal last traded below $1 in December 2003.
“The outlook for the global economy continues to weaken,” weighing on prices, Alex Heath, the London-based head of industrial metals at RBC Capital Markets, said in a report.
On the LME copper for delivery in three months fell $135, or 3.8 percent, to $3,420 a metric ton ($1.55 a pound.)
To contact the reporter on this story: Millie Munshi in New York at mmunshi@bloomberg.net.
