Copper futures fell almost five percent in late London Metal Exchange trade on Friday after striking workers at the key Escondida mine said they had resumed talks with the mine's owners.
Copper traded as low as $7,500 per tonne, down 4.8 percent from Thursday's closing price, after the Chilean union said efforts to come to a new wage and benefits deal had restarted.
"The only thing it can be is Escondida," an LME trader said after trading had finished. "It broke through $7,850 and after that it was one-way traffic, and it dragged almost everything else down with it."
Earlier on Friday the market rallied to $8,030 and on Thursday it traded at a four-week high of $8,150 as speculators bet on output from the mine, the world's biggest copper supplier, being cut by the strike.
Copper ended LME trading on Friday at $7,570, down $305 from Thursday's close.
Escondida was expected to produce around 3,500 tonnes a day this year. It normally accounts for about 8 percent of global copper production and 20 percent of Chilean output.
The strike which started on Monday has cut production by around 60 percent and majority owner BHP Billiton has declared force majeure on delivery of copper concentrates.
Force majeure frees companies from their obligations without penalties if events are beyond their control. They are normally used in the case of natural disasters.
Nickel was the only metal to hold gains in industrial metal futures as worries about the damage to world growth from terror attacks receded and the focus returned to supply shortages.
It hit a new record high of $27,300 a tonne in earlier trading before ending the day at $26,700, up $200 from Thursday's close.
Stocks of nickel in LME-registered warehouses fell 564 tonnes to 5,814, but of that only 2,406 tonnes - less than one day's global consumption - is freely available.
Also boosting nickel prices was unusually strong demand for stainless steel. Traditionally August is quiet for stainless steel makers, but this year many still have full order books.
"Demand ... is still very strong and inventories are low," said Neil Buxton, analyst at GFMS Metals Consulting.
"The stainless market has been exceptionally strong despite high nickel prices ... demand for stainless steel hasn't been affected ... You also have a strike in the background."
Also supporting nickel prices has been a decision by Toronto-listed Inco to shut down production facilities at its 54,000 tonne-per-year Voisey's Bay nickel mine in Canada after workers went on strike.
Metals prices across the board slipped on Thursday after British police said they had foiled a plot to blow up transatlantic airliners.
Aluminium ended Friday's trading at $2,520, down $25, and zinc was down $125 to $3,260. Lead did not trade but was quoted at $1,170/1,175, down $20, and tin was off $25 to $8,375.
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