LONDON — Copper prices could bottom at multiyear lows last hit in December, with shoots of recovery possible in late 2009 as stimulus packages and cutbacks support prices.

Investors experiencing an economic downturn not seen in decades, believe more cutbacks are inevitable as about 10 per cent of current producers are losing money.

“Global industrial production is down very substantially,” said Max Layton, an analyst at Macquarie Bank Ltd.

“It is down as sharply and as deeply as in the mid-1970s recession, which is by far the deepest and sharpest decline in demand that we have on record over the last 40 years.”

He sees no significant rebound in demand in China until the second half of this year.

Copper, used mainly in construction and power, has fallen more than 60 per cent since hitting an all-time high of $8,940 (U.S.) a tonne last July.

The copper price hit its lowest level since late 2004 on Dec. 24, 2008, at $2,825, but is currently at around $3,200.

A Reuters poll of commodity analysts last month showed prices of copper are expected to average $3,417 a tonne this year, compared with the average price of $6,959 per tonne in 2008.

Analysts said fiscal packages announced in China will help support prices in the second half of this year, with U.S. and European stimulus plans giving extra support in 2010.

But many are talking about the need for more stimulus packages to battle the economic downturn.

“It is a very difficult situation,” Michael Widmer, a metals analyst for BNP Paribas, said.

“If those [stimulus packages] prove not to be successful and demand doesn't pick up on the back of those – it's going to be a very difficult year for the copper market.”

Analysts set marginal production costs for copper at about $3,100 to $3,500 a tonne, with average production costs at around $1,700 to $1,800.

“The underlying demand is extremely weak and is going to stay extremely weak,” Mr. Widmer said.

He added that London Metal Exchange copper inventories – currently at about 520,000 tonnes – will hit more than 700,000 tonnes before the year is out.

Since the Reuters base metal forecasts survey earlier this month, Barclays Capital has changed its copper projections for 2009.

Barclays' surplus estimates are now 291,000 tonnes compared with 176,000 tonnes previously, with prices this year cut to $3,900 a tonne from $4,400.

“It has become clear that the deterioration in global consumption was stark in the fourth quarter of 2008 and I believe that this will continue through early 2009,” Barclays analyst Gayle Berry said.

“Cutbacks will offer support to prices. So far though cutbacks have been very slow in the copper market … we estimate that around 800,000 tonnes per year has been cut from 2009 output so far and the further prices fall into the cost curve the more production will be cut.”

The global recession and falling copper demand is mirrored in worsening economic data; for example, Japan is suffering its worst quarterly contraction in 35 years.

Earlier this month, China's imports of unwrought copper and semi-finished copper products slipped, while in January, data showed a slowdown in pace of expansion in the world's biggest metal consumer.

The global financial crisis and sharp falls in metals prices have also forced several companies to abandon or put on hold their plans to bring new mines on stream, such as African Copper and BHP Billiton.

Most commodities analysts see a partial recovery in copper prices in 2010 but there is far from a consensus on any economic recovery.

Last month, veteran cross asset strategist Albert Edwards at Société Générale SA, said the U.S. economy looked likely to enter a depression and China's could implode.

“A year ago no one was talking about recession, they were talking about slowdown [and] here we are in recession,” said Calyon analyst Robin Bhar. “In a worst case scenario you come below previous downturns … the low in the last downturn in 2001 was below $1,340 a tonne.”

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