UPDATE 8-Copper drops to 33-month low as demand fears mount

* Metals tumble on global recession fears after U.S. data

* Copper slides nearly 8 pct to lowest since January 2006

* RUSAL says many aluminium producers below break-even
(Recasts, updates with N.Y. copper closing comments; adds NEW YORK
dateline/byline)

By Julie Crust and Chris Kelly

LONDON/NEW YORK, Oct 16 (Reuters) - Copper prices plunged to
their lowest levels in nearly three years on Thursday amid concerns
that a global recession will further suppress already weakened demand
for industrial materials.

Zinc and lead prices fell more than 10 percent after economic
data from the United States showed September industrial production
posting the biggest monthly decline since 1974. [ID:nN16468289]

"Going forward, I'm looking for further weakness in the
industrial metals," said Zachary Oxman, senior trader with Wisdom
Financial in Newport Beach, California. "There's a lot of demand
destruction in commodities right now."

Copper MCU3 for delivery in three months on the London Metal
Exchange fell as low as $4,545 a tonne, a drop of 7.6 percent, to its
lowest price since January 2006. The metal, used in the construction
and power industries, closed at $4,660 a tonne, down 5.3 percent from
$4,920 on Wednesday.

In New York, copper for December delivery HGZ8 hit a session
trough at $2.0405 a lb on the New York Mercantile Exchange's COMEX
division. The benchmark contract settled down 12.50 cents, or 5.7
percent, at $2.0855.

"All the data is pretty bearish. The industrial production was
for September, so you can expect that we are yet to see the big
fallout from the last month in particular," said commodity strategist
David Thurtell at investment bank Citigroup.

"The Philly Fed data was shocking," he added.

U.S. Mid-Atlantic regional factory activity crashed to an 18-year
low in October, adding to the grim toll the last month of credit
turmoil has taken on the economy. [ID:nN16387838]

LME zinc MZN3 fell 11.8 percent to a low of $1,164 a tonne,
before closing at $1,180, down from $1,320 Wednesday.

Wisdom Financial's Oxman believed most commodity markets were
suffering from a liquidity crisis.

"I think what you're seeing is these hedge funds going out there
and demanding liquidity. It's a liquidity crisis and, as such, you're
going to see selling in assets that really don't make sense to meet
margin calls, or to stay afloat and get into cash."

Base prices near or below the marginal costs of production have
forced some miners to cut back output and delay future projects.

"We are getting (production) cutbacks in some of the metals, and
eventually supply will tighten up and prices should recover,"
Citigroup's Thurtell said.

"Demand will also stabilise and then recover -- but when that is
is the $64 question."

Strategic Resource Acquisition Corp SRZ.TO said the credit
crisis and falling zinc prices forced the company to reduce its
Gordonsville zinc mine operations. [ID:nN15534000]

Lead MPB3 dropped 10.8 percent to a low of $1,351 a tonne,
before closing at $1,360, down from Wednesday's $1,515, on demand
worries for metal used in batteries.

North American shipments of replacement automotive lead-acid
batteries fell 8.6 percent in August from July, a U.S. industry group
said late on Wednesday. [ID:nN15343279]

In addition, J.D. Power and Associates, which tallies U.S. auto
sales on a daily basis, sees October sales on track to hit the lowest
level in 17 years. [ID:nN15310875]

Aluminium MAL3 ended at $2,180 a tonne, after falling as low as
$2,115 from $2,170 a tonne on Wednesday.

Prices for the metal -- used in construction, transport and
packaging -- have fallen more than a third since hitting a record
$3,380 in July.

Alexander Bulygin, chief executive of United Company RUSAL, the
world's largest aluminium producer, said Thursday that 75 percent of
aluminium producers in Europe, the United States and China were
operating at below break-even, with the metal trading at or below
$2,500 per tonne. [ID:nLG577245]

Aluminium stocks in LME-warehouses rose 9,225 tonnes to 1.47
million tonnes, the highest level since 1995.

Nickel MNI3 dropped 8.4 percent, or $1,005, to $10,950 per
tonne, while tin MSN3 traded at $13,400/13,500, down from $14,050.

China has slashed export quotas for tin for next year by 30
percent from 2008, a government website said. [ID:nLG66536]
(Additional reporting by Anna Stablum in London; Editing by Walter
Bagley)