BASE METALS: Copper Ends Lower As Greek Default Fears Weigh

Sep 14, 2011 NEW YORK (Dow Jones)--Copper futures declined Wednesday to their lowest levels this year as anxiety over the European sovereign-debt crisis dominated investor attention.

The most active contract, for December delivery, fell 6 cents, or 1.5%, to settle at $3.91 a pound on the Comex division of the New York Mercantile Exchange.

Thinly traded September-delivery copper fell 7.1 cents, or 1.8%, to settle at $3.8850 a pound.

Both are 2011 settlement lows.

Moody's Investors Service cut the ratings of two major French banks, sparking fresh worries about Europe's financial health. The credit ratings company cut Societe Generale SA (GLE.FR, SCGLY) by one notch to Aa3 and lowered Credit Agricole SA (ACA.FR, CRARY) by a grade to Aa2, citing their holdings of Greek government bonds.

Greek Prime Minister George Papandreou is due to tell German Chancellor Angela Merkel and French President Nicolas Sarkozy that his country is committed to reduce its public sector and introduce a property tax to cover its budget shortfall, a government spokesman said. Greece has teetered on the brink of default since early last year, when the country first turned to its euro-zone neighbors for financial aid. Since then, Greece has received two bailouts, but is struggling to comply with the spending cuts and budget targets these packages require.

"The macroeconomic uncertainty has restricted copper's ability to move higher since the middle of August," said Justin Lennon, base metals analyst with Mitsui Bussan Commodities in New York. "There is no clear resolution to Europe's problems and that discourages speculation in copper."

U.S. retail sales were flat in August, falling short of the 0.3% rise forecast by economists.

The data amplified the already negative tone as copper is widely used in consumer electronics like iPads and laptops.

"There hasn't been any encouraging macroeconomic news to hold on to...if anything, the macro news seems to be getting worse," Lennon said.

Production disruptions at two of the world's largest copper mines did little to stem the selling. Unionized workers at Peruvian copper mining company Sociedad Minera Cerro Verde SA (CVERDEC1.VL) started an indefinite strike Wednesday as they lobby for higher pay. The company is one of Peru's largest copper miners, and Peru is second behind Chile in global copper output.

Elsewhere, thousands of unionized workers at Freeport McMoRan Copper & Gold Inc.'s (FCX) Grassberg mine in Indonesia are set to start a one-month strike Thursday as negotiations for higher wages stalled. If the strike takes place, it will be the second stoppage in three months at one of the world's biggest copper mines.

"Usually when we have these strikes the market immediately rallies...[but] the black cloud of sovereign debt in Europe has put a damper on commodities as a whole," said Rob Kurzatkowski, senior commodities analyst with optionsXpress.

Copper settlements (ranges include electronic and pit trading):
Sep $3.8850; down 7.1 cents; Range $3.8785-$3.9485
Dec $3.9100; down 6.00 cents; Range $3.8850-$4.0110