Copper hits 18-month low

Copper hit an 18-month low on Tuesday before trimming losses as recession fears grew after the US Congress voted down a rescue plan for troubled banks. Talk that Congress may reach some kind of deal by the end of the week and speculation that central banks could slash interest rates eased risk aversion, with US stocks rebounding after Wall Street on Monday experienced its biggest one-day sell-off since 1987.
Copper for delivery in three months on the London Metal Exchange sank to $6,170 per tonne, its lowest since March 2007, before closing at $6,360, down $80 from Monday's close. Other base metals also tumbled. Aluminium dropped to an eight-month low of $2,405 per tonne and nickel fell to $15,588, its lowest level since April 2006. "People see a continuous deterioration in the economic outlook," analyst Gayle Berry at Barclays Capital said.
Industrial raw materials have taken a drubbing since touching record highs mid-year. Copper was off 30 percent since its record of $8,940 per tonne in July as declines have accelerated in the past few days. As the credit crisis spreads to European banks, metals markets are bracing for a weak second half, with even top global metal consumer China expected to slow down.
"The question mark is what is the Chinese economy going to look like for the rest of this year," said Thys Terblanche, director and global head of mining and metals at Standard Bank. "We continue to be carefully optimistic ... but China is a key driver."
Over the past year, as the credit crisis escalated, the bull story for commodities remained intact with demand from emerging countries - mainly China - taking up the slack as the United States and Europe slowed down. But China's refined copper imports dropped 0.02 percent in August and demand for copper grew at 4.8 percent in the first eight months of the year, far below the 36 percent surge in 2007.
"Chinese factories are reportedly closing as consumer demand fails and industrialists attempt to protect assets," analyst John Meyer at Fairfax said in a research note. The Shanghai Futures Exchange will be shut this week for National Day holidays. There was news of supply problems, but the market took little notice. Workers at Xstrata's Kidd metallurgical operations in northern Ontario looked set to strike after contract talks broke off on Monday.
Aluminium producer Alcoa Inc said it would curtail the remainder of its Rockdale, Texas smelter due to local power supply and market conditions. Aluminium closed at $2,425 a tonne, down $17.
Nickel tumbled to its lowest level since April 2006 and was last at $15,800 per tonne, versus $16,400 on Monday. Lead ended unchanged at $1,830 a tonne, after hitting a six-week low of $1,729.75. Zinc fell 3.5 percent to $1,633, before closing at $1,680 versus $1,693, and tin was down $550 at $17,250.