NEW YORK/LONDON: Copper sustained its largest one-day decline in nearly three weeks on Thursday as losses piled up late alongside an accelerated downturn in equities and on a bearish technical break that could keep prices under pressure in the near term.
Another round of encouraging US economic data and mounting supply-side constraints in Indonesia did little to stem copper's collapse, as broader markets continued to keep the focus on Europe, where rising borrowing costs in Spain fed fears that the region's debt crisis could spread further and curb demand for industrial metals the longer it goes on.
"We'd be cautious about prospects for base metals going forward. Fundamentals for copper are positive but you get times in the pricing cycle where fundamentals can take a back seat," said Neil Buxton, managing director at ThomsonReuters-GFMS Metals Consulting.
"To satisfy the financial markets there's going to be a long period of (EU) belt tightening which is not good for underlying growth for industrial commodities. From demand perspective its going to get worse before it gets better."
London Metal Exchange (LME) three-month copper dropped $185 or 2.4 percent to close at $7,545 a tonne -- its biggest drop since Nov. 1, when the price fell over 3 percent. In after hours business, losses gathered speed to hit a late trough at $7,450.
In New York, the key December COMEX contract fell 10.20 cents or nearly 3 percent to settle at $3.3825 per lb, near the bottom end of its $3.3625 to $3.4920 range.
Technical selling kicked in after the price broke to the downside of an ascending triangle formation, a move that could kick-start another leg lower, analysts said.
"It's negative ... we are now projecting a move down to the low $3.20's," said Ralph Preston, futures analyst with HeritageWestFutures.com in San Diego, California.
As the selling accelerated, so too did trading volume. More than 65,000 lots traded late in New York, up nearly 12 percent from the 30-day norm, according to preliminary Thomson Reuters data.
Losses in the metals gathered steam with plunging world stock markets after a rise in Spain's borrowing costs to almost 7 percent at an auction kept European debt contagion fears alive.
Investors ignored upbeat data showing new US claims for jobless benefits last week hit a seven-month low and permits for future home construction rebounded strongly last month.
Copper's robust fundamentals also took a backseat to Europe. A two-month-old strike at Freeport-McMoRan Copper & Gold Inc's Grasberg copper mine in Indonesia will impact the the company's fourth-quarter results, the company's CEO said on Thursday.
Freeport is losing production of 2 million pounds of copper and 3,000 ounces of gold every day the Grasberg strike continues.
GRIM CHINA EXPORTS
In China, a big consumer of industrial metals, the Commerce Ministry cautioned that the country's export outlook could be grim for the rest of this year and in the early part of 2012 as Europe struggles to contain its crisis and the United States tries to spur its fragile recovery.
Adding to investor caution, BHP Billiton the world's biggest miner, has turned more wary on the outlook for commodity markets, warning on Thursday that customers are starting to face tighter access to trade finance and some are cutting production.
But Credit Suisse analyst Stefan Graber pointed to pockets of news, including US manufacturing numbers on Tuesday, that have helped keep a floor under metals prices.
"There is some resilience in activity there which could help bring some stability, but the key factor to look at is still obviously Europe," Graber said.
In other metals, nickel ended up $10 at $18,150 a tonne. Even after losing nearly 28 percent of its value this year, the premium for cash nickel over the three-month price remained wide at $35.
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