Worries about euro zone debt, shrinking global manufacturing and demand from top consumer China pressured prices, with benchmark copper on the London Metal Exchange ending at $6,990 a tonne, down from Friday's close of $7,018.50, but recovering from a session low of $6,635, its weakest since July 21, 2010.
In New York, COMEX benchmark December copper futures closed 0.15 cent lower at $3.1505 a lb, up from its early decline to $2.9940, its lowest since July 2010.
The metal, used in power and construction, rebounded from the lows after a report showed US factory activity expanded at a faster pace than expected in September, along with a faster pace in August construction spending than forecast.
US construction spending unexpectedly rebounded in August from a drop in July as outlays on state and local government building projects rose sharply.
Despite upbeat US manufacturing data, factory activity in Europe and Asia slumped in September to levels not seen since the depths of the financial crisis. Export demand dropped, reinforcing fears of a return to recession.
"Copper rallied since those reports came out. But, if I had to say one word, it's China. It's not so much what's going on in America as it is the driving engine of China. We are now in the back seat to China and when they sneeze, the world catches a cold. They sneezed and the world is concerned," said Jeffrey Friedman, senior market strategist at MF Global in Chicago.
China reported a slight uptick in its official PMI. Though gains are typical for September, this year's increase was smaller than average.
"We have seen China de-stocking copper for most of the year, with a gradual pick-up in imports. But at the same time, we also see increased stress in the Chinese housing market," said Bjarne Schieldrop, chief commodity analyst at SEB.
"Worries about a less soft landing in China's economy are increasing, in addition to stress in Europe and the United States," he added, echoing other analysts.
Base metal markets had been anticipating China's return after inventories were run down, particularly in copper. But a slowdown in the auto and housing sectors was seen capping demand.
"We don't believe it (China) can step in and give the commodity markets the recovery it saw in 2008. (China is) overall positive, but not fantastically positive. Chinese growth rates remain healthy, but at lower rates," Paul Robinson, group manager non ferrous metals at CRU told a London Metal Exchange (LME) seminar.
Keeping concerns about the euro zone debt crisis alive, Greece will miss a deficit target set just months ago in a massive bailout package, according to government draft budget figures released on Sunday.
Dollar gains on the euro also weighed on metals. The euro slid to an 8-1/2-month trough against the US currencies on worries about the health of the euro zone's banking sector and after the improved US data.
A stronger US currency makes dollar-priced commodities costlier for holders of other currencies.
COST SUPPORT
Other metals performed better than copper, with aluminium up at $2,203 a tonne from $2,163 at Friday's close.
"The recent divergence between the fall in prices of copper and aluminium underlines the perception that commodities investors always turn to marginal cost of production in order to guess the potential losses during a market downturn," said Metal Bulletin Research analyst Kamil Wlazly.
Aluminium is already below its average marginal cost of production of close to $2,500 per tonne, which limits the downside due to potential supply cutbacks, the report added.
Zinc and nickel were also supported by high production costs in comparison with their trading prices.
Nickel rose more than 7 percent to end at $19,025 a tonne from $17,600 on Friday. Traders attributed the move to short-covering and comments from nickel producer Norilsk, which said output might drop this year because producers are losing money at current prices.
Zinc, used to galvanize steel, closed at $1,893 a tonne from $1,860 Friday's close.
Tin ended at $20,500 from $20,350 while battery material lead closed at $1,961 from $1,985.
Copyright Reuters, 2011