Copper Extends Losing Streak

Apr 11, 2012 NEW YORK (Dow Jones)--Copper prices locked in their third consecutive day of losses as worries about Spain's debt problems set a cautious tone to the market.

Investors often look to copper as an economic bellwether, because the metals widespread applications in electronics, manufacturing and construction make its price sensitive to shifts in business activity.

The most actively traded contract, for May delivery, settled down 1.05 cents, or 0.3%, at $3.6395 a pound on the Comex division of the New York Mercantile Exchange. This was the lowest settlement price in almost 12 weeks, since prices ended at $3.6370 a pound on Jan. 13.

Spain dominated trader attention, as the cost of insuring the debt of the euro-zone's fourth-largest economy continued to soar. Investors are worried that Spain won't meet its budget and deficit-reduction targets, tipping the chances of default higher.

"The level of focus [on Spain] has ramped up but the market has kind of waiting for it to happen," said Bill O'Neill, principal at Logic Advisors.

Copper is widely used in everyday goods like phones, cars and in housing construction, and demand for such products tends to erode when the economy slows down.

Adding to the concern, Spanish industrial production fell 5.1% in February, in calendar-adjusted terms, after sliding 4.3% in January. Spain's industrial output hasn't been in positive territory for a year.

"After just surviving the Greek mess, the markets will not be in the mood for a Spanish spiral," traders at RBC Capital Markets said in a note to clients. "Expect money to hide on the sidelines as traders watch yields of the [Portugal, Ireland, Greece and Spain bonds] to gauge if we are again at a tipping point."

Earlier in the day, reports of an 8.6 magnitude earthquake off Indonesia's western-most province of Aceh on Wednesday tempered copper's losses. Indonesia is an important mining region which produces about 396,000 tons of nickel, 485,000 tons of copper and 52,000 tons of tin.

Copper prices caught some support from the tremor, as traders worried about the potential impact on metal production.

"The earthquake was off the west coast of Northern Sumatra which on a preliminary basis seems to be away from the major mining centres," Barclays said in a note.

However, copper prices remain vulnerable to bad economic news.

"Any negative economic data from U.S. or China could easily spark another wave of selling," said Sucden Financial in a note to clients.

Copper settlements (ranges include electronic and pit trading):
Apr $3.6360; down 1.00 cents; Range $3.6350-$3.6375
May $3.6395; down 1.05 cents; Range $3.6305-$3.6730