Jan. 29 (Bloomberg) -- Copper prices may slump by more than half this year as the global recession cuts demand, according to MF Global Ltd., one of 12 companies that trade on the floor of the London Metal Exchange.

The three-month contract may average $3,250 a metric ton in 2009, the company’s Darien, Connecticut-based analyst Edward Meir wrote today in a report. Copper futures in London averaged $6,886 a ton last year, and traded today at $3,330.

MF Global joins Resolved Inc. President David Threlkeld in forecasting lower copper prices as demand slumps. Copper is an indicator for the world economy and sets the pace for other industrial metals because an average of 400 pounds (181 kilograms) are used in homes and 50 pounds in cars, according to the Copper Development Association.

“We expect metal producers to scale back production for most of this year, as in addition to the credit issues, the cost pressures they face are enormous,” Meir wrote in the report. “Deteriorating demand is still outpacing the rate at which production is being slashed.”

The International Monetary Fund forecast yesterday that the global economy will almost halt this year as bank losses from toxic, U.S.-originated assets reach $2.2 trillion. Economic growth will come to a “virtual standstill,” according to Olivier Blanchard, the IMF’s chief economist.

Output Cuts

MF Global expects aluminum to average 52 percent lower at $1,250 a ton. Supply may exceed demand by “anywhere between 500,000 to 2 million tons” even after output cuts of “anywhere between 4 million to 6 million tons.”

Zinc may average 45 percent lower at $1,050 a ton, while lead may average 40 percent less at $1,250 a ton, according to the report. Nickel futures are expected to average 51 percent lower at $10,500 a ton, and tin 38 percent less at $11,500 a ton.

“Cutbacks take time to flow through the system,” Meir wrote.

Still, expectations for a weaker dollar will benefit commodities as investors’ focus shifts away from recessionary conditions toward a possible revival of economic growth and potential inflation, Meir wrote.

For 2010, MF Global forecast copper at $3,600 a ton, aluminum at $1,600, zinc at $1,300, lead at $1,450, nickel at $13,500, and tin at $15,000.

To contact the reporter for this story: Glenys Sim in Singapore at gsim4@bloomberg.net

Last Updated: January 28, 2009 21:05 EST