Comex Copper Slips Again On Demand Worries

Feb 23, 2012 NEW YORK (Dow Jones)--Worries about industrial demand in Europe and China pressured copper prices on Thursday, sending futures lower for a second day despite upbeat U.S. economic data.

The most actively traded copper contract, for March delivery, fell 2.75 cents, or 0.7%, to settle at $3.806 a pound on the Comex division of the New York Mercantile Exchange.

The European Commission said Thursday that the euro zone will slip into a recession in 2012. The European Union's executive body expects gross domestic product of countries that use the euro to decline by 0.3% during the first quarter, equal to the contraction seen in the last three months of 2011.

Copper prices were lifted at the beginning of the year by the view that Europe was succeeding in staving off a debt-fueled financial crisis. But the budget-cutting measures implemented by many countries appear to be taking a toll on growth, reducing copper demand expectations.

Copper is sensitive to the growth outlook because of its widespread applications in construction and manufacturing. The ductile and electrically conductive metal is found in wiring, plumbing and consumer electronics.

Other investors have worried that demand from China, which accounts for about 40% of world consumption, isn't strong enough to justify copper prices that earlier this month neared the $4-a-pound level.

Consumers there have been slow to return to the metals markets after last month's Lunar New Year holiday, Barclays Capital analyst Gayle Berry said in a note. "Business activity has picked up, though it remains soft."

A preliminary gauge of China's manufacturing sector released on Wednesday showed activity continued to contract in February, though at a slower pace than the previous month.

"Copper (traders) are waiting on China," said Ira Epstein, commodities analyst and director of the Linn Group's Ira Epstein division. Market participants widely expect Beijing to further ease monetary policy in an effort to prop up growth, a development seen making it easier for factories to get the credit they need to buy metals.

"The market needs to see the money actually given to the banks before they start loading up on metals again," Epstein said.

Copper futures held their earlier losses on Thursday after a better-than-expected reading on the U.S. labor market. Data on U.S. home prices and manufacturing activity in the Kansas City Fed region also underlined strength in the world's largest economy. 

Copper settlements (ranges include electronic and pit trading):
Mar $3.8060; down 2.75 cents; Range $3.7735-$3.8395
May $3.8140; down 2.85 cents; Range $3.7830-$3.8490