Copper ended down for a third straight day on Thursday with London prices cracking below the $7,000 (U.S.) a tonne level for the first time since late December, as dollar-related pressures and concerns over Chinese monetary tightening fed further bouts of risk aversion.
Copper for three-months delivery on the London Metal Exchange tumbled $340, or 4.7 per cent, to close at $6,890 a tonne. This was the first time since Dec. 23 that prices of the metal used in power and construction traded below $7,000.
At the New York Mercantile Exchange's Comex division, benchmark copper for March delivery dropped 12.45 cents, or nearly 4 per cent, to close at $3.0980 a pound.
Bart Melek, Global Commodity Strategist with BMO Nesbitt Burns in Toronto, said the recent loss of risk appetite across the broader commodity spectrum was manifested in a stronger U.S. dollar.
The greenback rose to its highest point against the euro in more than six months amid persistent concerns over the economic health of some smaller euro zone countries such as Greece and Portugal.
"We are continuing to see the unwinding of the short-dollar/long commodity trade," Mr. Melek said.
He said copper prices were now correcting from overheated levels, with concerns about economic growth in China at the forefront of the selloff.
China is the world's largest commodities consumer and played a big role in copper's 140 per cent gains in 2009.
Dampening sentiment further, equities were mostly negative after U.S. President Barack Obama's State of the Union speech, which contained no new plans to tighten Wall Street oversight.
Instead, he pledged to curb exploding deficits, boost job growth by doubling exports in five years and pursue his health care reform plans.
"What he didn't say probably was construed as positive, he didn't specifically talk about bank regulation," said Calyon analyst Robin Bhar.
U.S. economic data reflected growing doubts over the pace of economic recovery. Initial U.S. jobless claims fell less than expected, while durable goods orders increased less than expected in December.
Investors have been unnerved by the speed of China's attempts to rein in excessive credit growth this year since it announced on Jan. 12 that it was raising domestic banks' reserve requirement ratios.
"At this point, exports are still not buoyant by any stretch as the U.S. and European economies are in fragile recoveries," Mr. Melek said. "I refuse to believe China would tighten things up domestically before they are quite sure that the West can handle things, and help them along on the export side."
The relentless rise in LME stocks indicates physical demand for copper remains weak outside China, however.
LME copper inventories rose 1,575 to 540,175 tonnes - the highest level since February last year.
In other metals, zinc ended down $78 at $2,158 a tonne. After the close, the metal used to galvanize steel fell to $2,130, its lowest level since Oct. 21.
Lead closed at $2,055 a tonne from $2,125. It too fell further in electronic business to $2,030, matching a low reached in the middle of September last year.
Australia's giant Century zinc mine said production will rebound in 2010 after technical problems cut output in 2009.
LME aluminum , used in transport and packaging, ended down $72 at $2,108 a tonne, before extending losses late to a two-month low of $2,089 a tonne. Tin closed at $17,550 from $17,850, while nickel was at $18,350 from $18,195. It later dipped to a 2-1/2 week low at $17,740.