Comex Copper Hits 2012 Low On Euro Crisis Fears

May 30, 2012 NEW YORK (Dow Jones)--Copper futures sank to 2012 lows on Wednesday, weighed down by worries that Europe's banking crisis would slash demand for the industrial metal.

The most actively traded copper contract, for July delivery, fell 7.2 cents, or 2.1%, to settle at $3.39 a pound on the Comex division of the New York Mercantile Exchange, the lowest settlement price since Dec. 29.

The euro on Wednesday slipped to its weakest level against the U.S. Dollar in almost two years on continued worries about Spain and after a disappointing Italian bond auction. Copper investors, like traders of other growth-sensitive assets, have kept a close watch on the European common currency as the euro zone's debt crisis escalated in recent weeks.

Late Tuesday, ratings firm Egan-Jones downgraded Spain's credit rating further into junk territory, helping to send Spanish borrowing costs on its 10-year bonds to their highest level this year. Retail and corporate deposits in Spanish banks dropped to their lowest point since the euro-zone debt crisis began, according to European Central Bank data.

Industrial metals "endured another pasting today as the European Debt crisis continues to escalate," traders with RBC Capital Markets said in a note.

The copper market tends to react quickly to shifts in the economic outlook because of the metal's widespread use across industries, including autos, construction and consumer electronics. Futures slumped last week on worries about rising borrowing costs for heavily indebted European countries like Spain, as well as the uncertainty surrounding a potential Greek exit of the currency union.

"Market participants remain risk averse, particularly in the run up to Greek elections" set for next month, VTB Capital analyst Andrey Kryuchenkov said in a note.

Greece is set for fresh elections after political parties failed to form a coalition government after divisive elections this month. Some market participants have been cautious on the chance that the country reverses course on its budget-cutting measures, potentially putting its international financial backing in jeopardy.

Copper settlements (ranges include electronic and pit trading):
Jun $3.3865; down 7.50 cents; Range $3.3720-$3.4025
Jul $3.3900; down 7.20 cents; Range $3.3725-$3.4720