Mining Profits...Investing In Industrial Metals

Copper prices tumbled the most in three weeks on speculation a slowdown in the U.S. economy, the world's largest, may reduce demand for commodities, including metals.

The Reuters/Jefferies CRB Index dropped 12 percent in the third quarter, the most since at least 1956. Copper in New York is down 18 percent from a record $4.04 a pound a metric ton in mid- May. U.S. manufacturing expanded less than analysts estimated in August and spending on home construction dropped for a fifth straight month, reports showed yesterday.

``The concern on the U.S. economy is far from over,'' said Roy Carson, a London-based analyst at Triland Metals Ltd. Triland is one of 11 companies that trade on the floor of the London Metal Exchange.

Copper futures for December delivery fell 11.45 cents, or 3.3 percent, to $3.315 a pound at 9:27 a.m. on the Comex division of the New York Mercantile Exchange. A close at that price would mark the biggest percentage drop since Sept. 11.

Before today, prices were up 68 percent this year. A futures contract is an obligation to buy or sell a commodity at a fixed price for a specific delivery date.

Copper for delivery in three months dropped $250, or 3.3 percent, to $7,270 a metric ton on the LME. Before today, prices had almost doubled from a year ago.

The Institute for Supply Management's manufacturing index fell to 52.9. The gauge was expected to fall to 53.5 from 54.5 the prior month, based on the median of 64 forecasts in a Bloomberg News survey. Private residential construction spending dropped 1.5 percent, the Commerce Department said yesterday.

Xstrata Outlook

Industrial metals have dropped in the past four months after interest-rate increases worldwide spurred speculation that investment and consumer demand for the metals may dwindle.

The outlook for metals, including copper and nickel, is ``very strong'' in the next six months because miners are not producing enough to meet demand, Xstrata Plc Chief Executive Officer Mick Davis said today in an interview in London.

``I would be somewhat surprised if we ended up with a surplus next year'' of copper and nickel, Davis said.

Copper supplies from mines and scrap yards will outpace demand in 2007 by 176,000 metric tons, down from a surplus of 239,000 tons this year, the Lisbon-based International Copper Study Group said yesterday in a report.

Lead prices gained after inventories declined the most in 16 months. Stockpiles monitored by the LME fell 2,625 tons, or 4.4 percent, to 57,425 tons today.

Lead climbed $14, or 1 percent, to $1,390 a ton in London.