By Anna Stablum April 28 (Bloomberg) -- Copper may fall in New York on speculation that debt crises in Greece and other European nations will stall the region’s economic recovery and erode demand for industrial metals. Europe accounts for 20 percent of global copper demand, according to Barclays Capital. Yields on Greek two-year notes jumped to a record today after Standard & Poor’s cut the country’s debt rating to below investment grade yesterday. “Risk aversion increased and sentiment deteriorated,” Eugen Weinberg, an analyst at Commerzbank AG in Frankfurt, said by phone. Futures for July delivery were unchanged at $3.3825 a pound at 9:25 a.m. on the Comex in New York. The most-active contract earlier declined to $3.344, the lowest intraday price since March 26. Copper for delivery in three months fell 0.6 percent to $7,445 a metric ton on the London Metal Exchange. Global copper consumption will rebound 5.4 percent this year to 18.5 million tons, leaving supply and demand balanced after at least two consecutive years of surpluses, Barclays Capital estimates. Europe accounts for 17 percent of global lead consumption, 25 percent of nickel and 19 percent of zinc demand, it estimates. Western Europe consumes about 15 percent of all aluminum produced, Barclays Capital said. “Upside Capped” Copper futures outstanding, or market open interest, reported by LME members and compiled by the exchange, have dropped 3.2 percent since this year’s peak on April 16. There were 426,393 contracts outstanding as of April 26, the latest data from the bourse on Bloomberg show. “With the upside capped for now speculators see little point in holding copper for much longer,” said Andrey Kryuchenkov, an analyst at VTB Capital in London, in a note today. The euro has dropped 7.5 percent against the dollar this year. Metals are “trading largely on the back of broader market sentiment,” Kryuchenkov said. “This is especially evident after last night’s sovereign rating downgrades on Greece and Portugal by S&P that triggered yet another wave of risk aversion.” Greece was lowered to BB+ from BBB+ by S&P yesterday, which also warned that bondholders could recover as little as 30 percent of their initial investment if the country restructures its debt. Portugal’s rating dropped to A- from A+. The danger for European officials is that the fiscal turmoil which started six months ago with fudged Greek budget data will spin out of their control. As Greece waits for its euro-region partners to disperse funds, the European Union has announced no concrete plans to help other nations should aid be needed. “We see potential for some further short-term weakness across the metals on the back of dented sentiment and risk reduction,” Barclays Capital said in a report today. “Ultimately we expect prices to resume the uptrend given the continued improvement in fundamentals. Indeed, we view these pullbacks as creating a buying opportunity,” it said. Copper stockpiles tracked by the LME fell for a third day, down 0.3 percent to 504,025 tons, the lowest level since Jan. 4. Bookings to remove metal from inventories declined 1.1 percent to 30,075 tons today, paring a 39 percent rise over the past week. Nickel for three-month delivery on the LME fell 2.2 percent to $25,350 a ton. LME inventories fell for a 16th day, the longest drop since June 2006, to 145,350 tons, the lowest since Dec. 11. Prices have gained 37 percent this year, the most among the six main metals traded on the exchange. Zinc fell 0.8 percent to $2,342 a ton. Aluminum climbed 1.6 percent to $2,184 a ton. The contract dropped as much as 7.8 percent yesterday, the biggest intraday decline since January 2005. Tin retreated 2.8 percent to $18,024 a ton and lead fell 2.3 percent to $2,247 a ton. --Editors: Claudia Carpenter, John Deane To contact the reporter on the story: Anna Stablum in London at astablum@bloomberg.net. To contact the editor responsible for this story: Stuart Wallace at swallace6@bloomberg.net.

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