Copper prices tumbled nearly 7 per cent Thursday, the biggest one-day collapse in four weeks, on fears of a double-dip recession and growing doubts that Europe will get a handle on its debt crisis.
Metals, often seen as a proxy for underlying economic conditions due to their wide use in industry, were hit hard by the spectre of a global slowdown with lead, zinc and aluminum all hitting their lowest level in more than a year.
Taking its directional cues from Asia, where prices fell the 6-cent daily limit, copper's decline far outstripped losses in other commodities, bucking its bullish supply situation, where the world's second-largest copper mine is running at about two-thirds of its capacity after a month-long strike.
Other risky assets like oil and agricultural commodities went down between one and two per cent.
"Copper tends to lead other markets. If copper prices are starting to begin another leg lower now – nearly 10 per cent in just two days – that's not just a blip on the radar ... it is indicative of investors' concern about the global economy," said Adam Sarhan, chief executive of New York-based Sarhan Capital.
"Copper right now is signaling that the global economy might be in for a double dip."
London Metal Exchange (LME) benchmark copper dived $475 (U.S.) or 6.6 per cent to finish at $6,735 per tonne, its biggest daily decline since Sept 22, when it plunged over 7.5 per cent.
In New York, the key December COMEX contract dropped 20.05 cents or 6.2 per cent to settle at $3.0575, close to the bottom end of its $3.2350 to $3.0310 session range.
Volumes perked up Thursday as the selling intensified. Close to 64,000 lots traded in New York, nearly 12 per cent above the 30-day average, according to Thomson Reuters preliminary data.
Copper extended a reversal from Monday's three-week high near $3.50 in New York and $7,660 in London, leaving both markets vulnerable for a retest of their 2011 lows, at $2.99 and $6,635, respectively.
"People are saying these metals are not trading on the fundamentals, they are trading on the macro, but there is nothing more fundamental in the world than the economic outlook," analyst Stephen Briggs of BNP Paribas said.
"The bank's (BNP Paribas) view is that Europe will muddle through and find a solution, but clearly the market is worried that that might not be the case," he added.
A high-profile EU summit will go ahead on Sunday as planned, according to sources in Germany's ruling coalition, but it will not reach a decision on leveraging the euro zone rescue fund, the European Financial Stability Facility.
Sentiment briefly improved after the Federal Reserve Bank of Philadelphia said its index of business conditions in the U.S. Mid-Atlantic region rose in October.
BHP Billiton, the world's largest miner, in the face of short-term market volatility warned on Thursday of increasingly wary customers, although it said its order books were full due to resilient Chinese demand.
"We are also seeing that customers are looking closely at their inventory levels as they operate their businesses, cognizant of the potential need to tailor their plans if the global economic uncertainty continues," chief executive Marius Kloppers said in London.
Customer buying interest remained strong, he said, fueled by China, where domestic stockpiles have been "substantially liquidated."
China is the world's largest copper consumer, accounting for roughly 40 per cent of global demand of refined metal. Monthly imports of copper products rose to a 16-month high in September.