BASE METALS: Copper Falls For Fifth Day, Hits 14-Month Low

Copper futures fell for a fifth consecutive session Tuesday, hitting 14-month lows as investors bet stumbling economic growth would hit demand for industrial metals.

Global equities markets and growth-sensitive commodities were pressured by worries that Greece was sliding toward a default. The Greek government warned over the weekend that it wouldn't meet its deficit targets this year, and euro-zone finance ministers have delayed a decision on whether or when to provide another round of support for the debt-laden country.

The worry for investors is that a potential default by Greece or another euro-zone member will cause a credit crunch and upset global growth.

The most actively traded copper contract, for December delivery, fell 4.70 cents, or 1.5%, to settle at $3.1035 a pound on the Comex division of the New York Mercantile Exchange, the lowest settlement price since July 2010.

Copper's recent volatility could lead copper producers to delay or cancel mining projects, potentially threatening long-term supplies for the metal, the chief executive of the world's top copper producer, Chile's state-controlled Codelco, told Dow Jones Newswires.

"We have concerns because the world doesn't look too well, especially Europe," Diego Hernandez said on the sidelines of the London Metal Exchange industry week. "But we're quite optimistic for the supply and demand of copper. Probably demand is lower than expected but supply is also lower, and we expect the same equation again for next year."

Goldman Sachs and Standard Bank Tuesday both lowered their copper price forecasts for 2012.

Goldman, now expecting a "mild recession" in Europe, cut its London Metal Exchange copper price forecast by 14%, to $9,200 a metric ton, or $4.17 a pound, for next year. Standard cut its forecast by 6% to $8,950 a ton, or $4.06 a pound.

Benchmark copper for delivery in three months on the LME closed down 2.7% at $6,800 a ton Tuesday.

"Industrial metals and copper in particular have clearly borne the brunt of the growing pessimism about future economic and market conditions," Goldman analysts wrote in a research note. "Sentiment is likely to remain poor in the near term, suggesting the need for caution."

Copper is sensitive to the growth outlook because of its widespread uses across industries.

Copper's losses Tuesday came as Nymex operator CME Group Inc. (CME) said it would raise collateral requirements for copper futures for a second consecutive week. Including both increases, CME has increased collateral requirements by 35% since Sept. 26.

Exchanges typically use margin increases to make sure traders have the cash on hand to cover potential losses in volatile markets, and market participants say the increases can have the effect of forcing some highly leveraged traders to head for the exits.

The increase took effect at the close of business Tuesday, CME said in an emailed note after market's close Monday.

 
Copper settlements (ranges include electronic and pit trading): 
Oct. $3.0945; down 4.55 cents; Range $3.0780-$3.1250 
Dec. $3.1035; down 4.70 cents; Range $3.0360-$3.1550

-By Matt Day, Dow Jones Newswires; 212-416-4986; matt.day@dowjones.com

--Andrea Hotter and Francesca Freeman contributed to this article

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