NEW YORK/LONDON: Copper fell for a second straight day on Tuesday as a deceleration in China's economic growth engine sapped demand prospects and highlighted concerns about the festering debt crisis in Europe, the country's biggest trading partner.
Copper initially led a downhill plunge across most other risk asset markets after data showed China's economy grew at a 9.1 percent rate in the third quarter -- its slowest pace since the second quarter of 2009 -- as euro debt strains and a sluggish US economy took a toll.
With such a heavy dependence on the country's near 40 percent intake of the world's copper, prices of the metal extended losses after the growth data came in slightly below forecasts of 9.2 percent.
The country's steel and power output also fell, a further sign that economic problems in the West and Beijing's year-long monetary tightening campaign have begun to pinch.
"Their dependence upon US and European purchasing is enormous. If the West shuts down, China shuts down," said Philip Gotthelf, the president of Equidex Brokerage Group Inc in Closter, New Jersey.
However, better-than-expected US data and ongoing strikes at two copper mines owned by Freeport-McMoran Copper & Gold lent some support and pulled prices away from their lows.
London Metal Exchange (LME) three-month copper shed $46 to close at $7,449 a tonne.
In New York, the key December COMEX contract fell 1.80 cents to settle at $3.36 per lb, after dealing between $3.2575 and $3.3745.
Volumes picked up along with the market's volatility. More than 68,000 lots traded late in New York, nearly 20 percent above the 30-day norm, according to preliminary Thomson Reuters data.
Copper's negative correlation with the CBOE Volatility Index remained strong in October.
"Slowing growth in China has given the bears new reasons to roar this morning," RBC said in a note. "China's economy grew 9.1 percent in Q3 from a year earlier which has sparked concerns that Europe's debt crisis is dragging on the global economy."
Compounding Europe's problems, German investor morale dropped to its weakest level in nearly three years in October.
UBS economist Wang Tao said China's growth was bound to slow further as export growth could fall to as low as single-digit increases by 2012.
But escalating tensions at the world's second-largest copper mine in Indonesia could begin to have more of a positive price impact.
Freeport-McMoRan threatened to close its massive Grasberg mine, a development that could hurt the company's bottom line and further tighten an already strained supply/demand balance.
"Any shutdown will have a serious impact on the prices and market psychology," said Terry Ortslan, a mining analyst with TSO & Associates in Montreal.
"Major mines do not shut down indefinitely but given the size of this operation, the market cannot take any more bumps."
Data from the world's largest economy showed US producer prices rose more than expected in September to record their largest increase in five months.
Meanwhile U.S homebuilder sentiment hit its highest level in 18 months in October, though ongoing challenges still kept confidence historically low. Metal Prices at 1904 GMT COMEX copper in cents/lb,
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