Copper drops below $6000

Fears over likely US slowdown drag metal to eight-month low.

Copper fell in London, trading below $6,000 a tonne for the first time in more than eight months, on speculation that a report will show demand in the US did not grow last month. Other industrial metals also declined.

Copper, used in wires and pipes, has slumped to an eight-month low as supply increases and consumption growth slows. US manufacturing probably was on the verge of shrinking in December, economists expect a report from the Institute for Supply Management to show today. The US is the second-largest user of the metal after China.

"We will see more weakness in demand and prices in 2007,'' said Jean-Bernard Guyon, who manages about 160 million euros ($211 million) at Global Gestion France in Paris. Guyon said he doesn't hold copper-related stocks and reduced his holdings in nickel and zinc stocks.

Copper for delivery in three months on the London Metal Exchange dropped $145, or 2.4 percent, to $5,965 a metric ton as of 10:39 a.m. local time. It's the first time copper has traded at less than $6,000 since April 12.

The ISM's manufacturing index for December was at 50, from 49.5 in November, according to the median forecast of 60 economists surveyed by Bloomberg News. A reading below 50 signals a contraction. The November reading was the first slowdown in more than three years.

"The scarcity fear is going to disappear,'' said Peter Fertig, a commodity analyst at Dresdner Kleinwort in Frankfurt. A US slowdown "clearly reduces demand for the metal."

Further declines in copper are likely, said analysts including Neil Buxton at London-based GFMS Metals Consulting Ltd.

A fall below $6,000 a ton would trigger more technical chart-based selling, sending prices toward $5,000, Fertig said.