Copper plunges to lowest since 2009 as oil rout spreads to commodities

Hong Kong (Bloomberg) - Copper plunged to a five-and-a-half-year low, leading declines in industrial metals, as slowing global growth dims the outlook for commodities.

Copper tumbled 5.5 per cent by 11.52am in Tokyo on Wednesday, paring a loss of as much as 8.7 per cent, the biggest such retreat since July 22, 2009.

Nickel and tin slid more than 1.5 per cent as oil in New York and London traded near five-and-a-half-year lows.

The more-than 57 per cent plunge in crude prices since June is spreading to the metals market, dragging a Bloomberg gauge of commodity prices to the lowest levels in 12 years. The World Bank cut its global growth outlook, citing weak expansions in Europe and China, the world's biggest consumer of raw materials. Data on Wednesday is projected to show a gain in US oil inventories.

"The drop in oil prices is quite severe, so whenever there's some weakness in oil we tend to see risk aversion," said Hiroichi Nishi, an equities manager at SMBC Nikko Securities Inc. in Tokyo. "It's also heightening concerns of a negative influence on materials and infrastructure-related industries in the US, which would lower inflation and push out the timing of a possible interest-rate hike."

Copper for delivery in three months on the London Metal Exchange dropped as much as US$506.75 to US$5,353.25 a ton, the lowest intraday price since July 2009. The relative strength index for the contract, a measure of price momentum, plunged to 12, the lowest since at least 1986.

"The news everywhere is doom and gloom," said David Lennox, a resource analyst at Fat Prophets in Sydney. "Prices are going to keep sinking."

Nickel slid 2.4 per cent, zinc tumbled 1.6 per cent and tin retreated 1.6 per cent. Precious metals also declined, with silver down 0.9 per cent, platinum losing 0.4 per cent and palladium sliding 1.3 per cent. The Aussie dollar weakened to 81.07 US cents.

The Bloomberg Commodity Index of 22 energy, agriculture and metal products slid to the lowest level since November 2002 on Tuesday after dropping 17 per cent last year.