SHANGHAI: London copper hit a three-week low on Thursday, having lost ground for the last four sessions, after signs of a delay to a bailout for Greece soured sentiment and put the euro on the defensive against the dollar.
Three-month copper on the London Metal Exchange slipped 1.4 percent to $8,256.25 a tonne by 0332 GMT, lowest since Jan. 24.
The metal has dropped nearly six percent from a five-month high of $8,765 hit last week. Copper broke below the $8,280 a tonne level, a key support level, which could speed the downside technical momentum, analysts said.
The most-traded May copper contract on the Shanghai Futures Exchange fell by 2.2 percent to 59,110 yuan ($9,400 a tonne.
Wider market sentiment has been tarnished by a failure to find a bailout deal for Greece, some disappointing earnings results and US industrial production figures that weren't as impressive as they might have been, said Matt Fusarelli of Australia-based consultancy AME Group.
"Markets are very sensitive at the minute and any more weak numbers over the next couple of days in the very near term could add to downside pressure on metals," he said.
"There are concerns about Chinese demand, the closed arbitrage window and lower January imports, but that overstates the situation because the Lunar New Year fell earlier this year. We're still quite bullish on copper prices, expecting around $4.00 a pound ($8,818 a tonne) in the second quarter."
Greece expressed hope it can secure its second EU/IMF bailout in as many years and a deal on easing its debt burden next week, but its euro zone peers made clear the months of increasingly ill-tempered argument are not quite over yet.
Euro zone finance officials are examining ways of delaying parts or even all of a second bailout programme for Greece while still ensuring it avoids a disorderly default, several EU sources said on Wednesday.
Also adding to negative sentiment, Moody's Investor Service warned on Thursday it could downgrade the credit ratings of 17 global banks and securities firms due to more fragile funding conditions, increased regulatory burdens and a more difficult operating environment.
Overall industrial production was flat in January as unusually mild winter weather weighed on utility output, but US manufacturing output rose and a gauge of factory activity in New York state hit a 1-1/2-year high in February, showing a solid underpinning for the economic recovery.
In fundamentals, the arbitrage window or price differential between London and Shanghai remains firmly shut for Chinese imports, but there were indications interest was picking up in the spot market.
"We expect this consolidation to be short-lived given the improvement in the medium-term backdrop of the sector," Credit-Suisse Private Banking said in a note.
The discount for front month ShFE copper against the most active contract narrowed to around 350 yuan from 690 yuan on Wednesday as key contracts on ShFE and LME rolled over.
In other news, output from the world's largest copper mine, Chile's Escondida, plummeted 24.6 percent in 2011 from a year earlier to its lowest level in nearly a decade, on sinking ore grades and a two-week strike, the mine said on Wednesday.
Zinc miners are pushing smelters for a significant drop in fees they charge to convert concentrate into refined metal in 2012, due to prospects of tighter supply and lower spot premiums in China, industry sources said ahead of a gathering next week.
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