A spectacular drop in Asian demand for copper and a collapse in prices have forced Freeport-McMoRan Copper & Gold, the world’s largest listed producer of the metal, to reduce production, suspend dividends and cut capital spending in half.

The company, based in Arizona, told investors that copper prices had come under attack from a variety of factors, including financial market turbulence and growing anticipation that worldwide stocks of surplus copper would begin to build quickly. It also blamed the sudden flight of fund-based speculators from commodity markets, highlighting one of the key market forces behind the unprecedented boom in metal, energy and food prices this year.

The shares plunged by $3.77, more than 17 per cent, to $18.05 in New York. It was a dismal end to a year in which the shares hit a record high.

Leading investors interpreted Freeport’s $1.2 billion (£813 million) cut in capital spending and 5 per cent production cut for 2009 as an outright bid for survival. Richard Adkerson, the chief executive, said that he was “responding aggressively to the current market conditions, which have weakened dramatically in recent weeks”. Severe price drops, he said, would curb growth plans.

The company has already suffered a near80 per cent slide in its share price since June as investors have digested depressing news on the global economy – particularly the recent bear signals from China, where the once-white-hot construction boom drove prices of copper and a basket of other industrial metals to unprecedented highs.

Copper prices have since been hammered by a synchronised down-turn among other large-scale consumers of copper, including construction industries in emerging markets and the global car and electronics industries.

Freeport’s downbeat announcement came a week after authorities in Chile, the world’s largest producer of copper, finally acknowledged that the great bull market in commodities was over. The average copper price, the Chilean Government said, would stand at about $1.60 a pound in 2009, not the $3.20 optimistically predicted.

Freeport, along with the rest of the industry, is hatching contingency plans to cope with a further rout of copper prices that could take them to below $1.50 a pound for an extended period.

Freeport attempted to put an upbeat gloss on its announcement, however, predicting a recovery in copper prices as supply constraints and a shortage of new projects worked its way into market sentiment.

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