BASE METALS: Copper's Slide Tempered By Reconstruction Talk

NEW YORK (Dow Jones) - Copper prices to avoid the brunt of the sell commodities on Tuesday as traders looked beyond the immediate crisis of nuclear reactors for the reconstruction of Japan.
"Copper is the first thing you have to return and rebuild," said Charles Nedoss, senior market strategist at futures Olympus.
May copper, which has the largest number of contracts outstanding, ended 1.2% lower to $ 4.1370 a pound. Low price of copper March also fell 1.2%, settling 4.85 cents to $ 4.1250 a pound on the Comex division of the New York Mercantile Exchange.
In contrast, oil prices dropped 4% while many grains reached its daily loss limit. Wheat fell more than 7%.
While the exodus of investors from risky assets led to the selloff in the class of assets, short-term concerns about Japan's ability to import also played an important role. Japan is the largest customer of U.S. corn exports and pork as well as a key consumer of wheat, soybeans and meat.
An earthquake of 9.0 magnitude and tsunami hit northern Japan, Friday, decimating the country's east coast and damaging three of the six reactors at the Fukushima Daiichi nuclear complex. More explosions in the complex was reported Tuesday that the authorities struggled to keep the reactors from melting.
Market analysts expect an initial drop in metal demand in Japan, as the basic infrastructure and consumers will be slow to return to the market.
Once the immediate crisis passes, however, the reconstruction effort will require Japan to buy large amounts of industrial metals otherwise as it purports to replace copper for electrical power cables damaged by the tsunami. Aluminum will be needed for appliances, zinc galvanized steel used in commercial and residential construction and iron ore, molybdenum and nickel to produce stainless steel for added infrastructure.
Japan is one of the five largest consumers of metals in the world and has few natural resources.
"Everything from the power supply, housing, automobiles to consumer appliances will be necessary, and all the base metals markets will benefit from reconstruction efforts," said Max Layton, deputy head of materials Macquarie Securities Group premiums.
Traders are already positioning. The number of contracts for September delivery climbed 10% Monday. "Some people are seeing this as a buying opportunity," said Bill O'Neill, director of LOGIC Advisors.
Deutsche Bank said copper consumption in Japan may fall by up to 50 000 tonnes more than three months as the Japanese industrial production recovers from damage.
"This could be offset by demand for three times this magnitude," as reconstruction projects taking off, Duetsche Bank said, adding that copper and zinc, which are widely used in infrastructure and construction, are more likely benefit from reconstruction efforts.

(Source: http://online.wsj.com/article/BT-CO-20110315-714001.html)