By Millie Munshi Dec. 12 (Bloomberg) -- Copper tumbled the most in a week after the U.S. Senate failed to pass a $14 billion bailout plan last night for the country’s automakers. Today, the Bush administration signaled it may use part of the $700 billion fund for U.S. lenders to keep automakers afloat. That may prevent General Motors Corp. and Chrysler LLC from running out of cash this year. Copper had risen 10 percent this week before today on speculation the rescue plan would pass. The average car has about 50 pounds of copper tubes and wires. “Copper is falling under the pressure of the failure of the bailout talks for GM and the auto industry,” said Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago. “Copper won’t find any sustainable rally until the long-term direction of GM is determined, whether it be bankruptcy or a bailout. The market is looking for certainty.” Copper futures for March delivery fell 8.35 cents, or 5.5 percent, to $1.4285 a pound on the New York Mercantile Exchange’s Comex division. That marks the biggest one-day drop for a most-active contract since Dec. 5. The metal is still up 4 percent for the week. Futures pared losses after the Bush administration dropped its opposition to using bank-bailout funds to help automakers. “We will stand ready to prevent an imminent failure” of the industry, Treasury spokeswoman Brookly McLaughlin said in an e-mailed statement. White House spokeswoman Dana Perino said earlier that President George W. Bush would consider using the fund for lenders to keep carmakers from collapsing. “The first objective right now should be to put politics aside and help the country and the auto industry,” said Gijsbert Groenewegen, a fund manager at Gold Arrow Capital Management in New York. “Copper is falling today clearly as a reaction to the failed bailout and the idea that people don’t know what to expect of the economic climate going forward.” Outlook Copper will continue to decline as slumping growth in China, the world’s biggest metals user, reduces demand, Groenewegen said. The metal is down 53 percent this year. In November, China’s retail sales grew at the slowest pace in nine months as the economy cooled, a report showed today. China’s economic slowdown is deepening, with overcapacity in almost all industries, and won’t bottom out until the first quarter of next year, two senior officials said today. On the London Metal Exchange, copper for delivery in three months lost $145, or 4.4 percent, to $3,175 a metric ton ($1.44 a pound). “The sharp deterioration in global industrial output and in metals-intensive sectors continues to worsen the demand outlook for industrial metals in 2009,” Jeffrey Currie, the London-based head of global commodities research at Goldman Sachs Group Inc., said yesterday in a report. Goldman slashed its 2009 copper price forecast by 44 percent, saying the metal will average $2,950 a ton next year. That compares with a previous forecast of $5,230 a ton, the bank said. To contact the reporter on this story: Millie Munshi in New York at mmunshi@bloomberg.net.

Source