Sep 06, 2011 NEW YORK (Dow Jones)--Copper futures slid Tuesday to one-week lows as fears of renewed recession in the developed world curbed the demand outlook for the industrial metal.
The most actively traded copper contract, for December delivery, was recently down 7.95 cents, or 2%, at $4.045 a pound on the Comex division of the New York Mercantile Exchange. The contract fell as low as $4.022 a pound, the lowest intraday price since Aug. 25.
Signs of slumping growth in Europe and the U.S. and ongoing concerns about euro-zone sovereign debt have weighed on world financial markets this week, dragging growth-sensitive commodities such as copper and crude oil lower. Copper is sensitive to economic sentiment because of its widespread uses in construction and manufacturing.
The second-quarter gross domestic product of the euro zone's 17 members grew 0.2% from the first quarter, the monetary union's statistics agency said Tuesday, in line with previous estimates. The reading was up 1.6% from the second quarter of 2010.
Citing expectations for slower copper demand growth than previously expected, Citigroup this week cut its copper price forecasts. Analysts with the investment bank see copper prices averaging $4.13 a pound this year before falling to $3.80 a pound in 2012. The bank's previous forecasts expected copper to average $4.40 a pound this year and $4.27 a pound in 2012.
Compared with 2011, "we expect slower demand growth in 2012...across the major copper markets with Europe, China and U.S. demand growth slowing markedly," Citi analysts said.
Copper prices touched record highs in February and seemed poised to test those levels again in July on the view that supply growth would fail to meet rising global demand. But the chance of renewed recession in the developed world outweighed those supply concerns, dragging copper from its highs in July near $4.50 a pound to below the $4 mark last month.
Workers at Freeport-McMoRan Copper & Cold Inc.'s (FCX) massive Grasberg mine in Indonesia may hold a one-month strike beginning Sept. 15 as labor contract negotiations appear deadlocked, a union spokesman said Tuesday.
A July work stoppage at the mine led to about 35 million pounds of lost copper production, Freeport said.
Union workers at Peruvian copper producer Sociedad Minera Cerro Verde, which is majority controlled by Freeport, said late Friday that they would hold a two-day strike beginning Wednesday in an effort to gain a salary increase. The union said the strike may last indefinitely if its demands are not met.
Despite the supply disruptions, "rallies are likely to be sold into for base metals and upside remains capped," Standard Bank analyst Walter de Wet said in a note. The chance for declines in metals has increased in recent weeks, de Wet wrote, "in line with our belief that the probability of a recession in the U.S. and Europe has risen."