Copper fell more than 5 percent on Wednesday as a sell-off swept through the commodities and stock markets amid mounting concern about the European debt crisis.
Matching losses in gold and oil, the red metal was hit harder than the equities market and the euro, which fell 0.4 percent against the dollar to an 11-month low.
Copper prices have fallen for three straight days and some traders thought they could close in on $3 per lb, a level not seen since June last year.
"It's all the Europe fiasco. Based on the destruction they've done to the U.S... the dollar should be crashing, but Europe is worse," said Charles Bradford, analyst with Bradford Research Group.
"I think we're in such uncharted territory that a $3 or $2.5 price for copper wouldn't surprise me."
Benchmark three-month copper fell more than 5 percent on the London Metal Exchange to $7,176 a tonne, its weakest since Nov. 25, and was at $7,210 in the evening evaluations versus Tuesday's close at $7,600.
In New York, the key March COMEX contract settled at $3.2785 per lb., down 16.30 cents or 4.74 percent. It fell further in afterhours trading, dropping to $3.2770 per lb., close to a three-week low.
Copper clocked its largest percentage fall since it plummeted 6.1 percent on Oct. 20.
Steep losses in London accelerated after Comex opened as risk aversion pushed up the U.S. dollar and as revived talk of a downgrade of France's sovereign rating. This added to concerns the euro zone crisis will curb global growth and hurt demand for the industrial metal. France is a key contributor to Europe's rescue fund.
Markets are particularly frustrated that the European Central Bank is not buying more bonds of troubled European countries, a move widely seen as a requisite next step following last week's EU summit on strengthening fiscal unity in the bloc.
Activity in the physical market was minimal despite the sell-off, with most copper consumers content with their inventory levels until the new year, traders said.
"Premiums are pretty stable unlike the (futures) market," a physical trader said, pegging premiums between 4 and 5 cents per lb, which is in line with the range spot delivered premiums have traded for most of this year.
A second trader said he was surprised there had not been any buying on the back of the last few days of weak prices.
The lack of physical interest could be a sign of poor underlying demand for copper in the United States, although there are still arbitrage opportunities between the Chinese and U.S. premiums, traders said.
Top copper consumer China pledged on Wednesday to guarantee growth in the face of an "extremely grim" outlook for the global economy in 2012. Analysts expect its growth to slip below 9 percent next year for the first time in more than a decade.
Further impetus for selling came as a three-month strike ended at Freeport McMoRan Copper & Gold Inc's Grasberg mine in Indonesia, although the market appeared to overlook that news and remain focused on Europe's debt crisis.
"The fundamental data currently takes a backseat. Given the challenging financial market environment, we think that it is too early to buy industrial metals," said Credit Suisse.
Inventories of aluminium rose to a record 4.8 million tonnes and are likely to breach the 5 million tonnes level in the next few days as a souring economic outlook has curbed demand and a European dollar crunch has intensified the need for cash ahead of the year end.
This may be counterbalanced by an Asian import rise.
China's primary aluminium imports are likely to rise until March, with investors and merchants ramping up purchases after an arbitrage window between the LME and Shanghai opened for the first time since 2009, traders said.
The rest of the base metals on the LME followed copper lower, with tin basis three months hitting its lowest level since late September at $18,525 per tonne in the evening evaluations, down from $18,750 in the official session and $19,550 on Tuesday.
Stainless steel ingredient nickel ended the day at $17,400 per tonne, compared with $17,805 in the officials and $18,305 in Tuesday's official session.
Aluminium was below the $2,000 mark at $1,962 per tonne in the evening evaluations, down from $1,974 in the official session and a close at $2,001.5 on Tuesday.
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