Copper slumped 14 percent to its lowest level in nearly three years on Friday in a commodities-wide sell-off triggered by deepening worries over the prospect of a global recession.
Copper for three-months delivery on the London Metal Exchange crashed to $4,570 a tonne, its lowest level since January 2006 and its biggest one-day fall in electronic trading in both absolute and percentage terms since at least February 2001, according to Reuters data.
The metal, used in power and construction, closed at $4,800 a tonne from $5,315 at the close on Thursday. Prices have fallen 46 percent since a record high of $8,940 in July. "It's panic. It's fear of the unknown," said Calyon analyst Robin Bhar. "This has gone from the financial markets stage to the real economy."
The United States, Europe and Asia saw panic selling of stocks on Friday, knocking the benchmark world equity index to a five-year trough as fears grew that policymakers were not making enough effort to contain the financial crisis.
"The banking sector problem is now spilling over into other sectors," said Michael Lewis, global head of commodities research at Deutsche Bank. "It's obviously quite a powerful negative demand shock. Copper does look the most exposed."
Copper is now very close to $4,000, the average cost of production, according to some analysts. Others say average costs are just above $3,000 a tonne. Data showing a 59 percent surge in copper inventories at warehouses monitored by the Shanghai Futures Exchange also hit sentiment. Order intake for consumers of metal and other commodities has dried up in the last couple of weeks, Bhar said.
Aluminium tumbled 6.8 percent to $2,150 a tonne, its lowest since December 2005, a loss of more than 35 percent since an all-time high of $3,380 on July 10. It closed at $2,215 a tonne from $2,307 on Thursday. The metal used in transport and packaging has come under pressure in recent weeks on deteriorating car sales data.
Analysts said energy-heavy aluminium had broken through its average cost of production floor, but would not give a figure because of power cost fluctuations. Energy is estimated to account for up to 45 percent of aluminium smelting costs. "It's a very, very sombre picture," Stephen Briggs, commodity strategist at RBS global Banking & Markets. "There is only one game in town - economic meltdown."
Government and central bank action to break the gridlock in credit markets, shore up banks and stave off economic recession has failed to steady financial markets. Finance ministers and central bankers from the Group of Seven nations gathered in Washington on Friday to devise a strategy to end panic selling in financial markets.
Many of those who had thought China, the world's largest consumer of copper and aluminium, would offset falling demand elsewhere have now revised that stance. Proof that China is not immune came as the country's business confidence index fell sharply in the third quarter to 123.8 points, down from 134.8 in the second.
Stainless steel making raw material nickel plummeted 17.9 percent to $11,000 a tonne, the lowest since May 2004. It was last at $12,175 from $13,400 at the close on Thursday. Battery material lead slipped 17 percent to $1,375, its lowest since October 2006. It ended at $1,475 from $1,660.
Zinc fell 15.2 percent to $1,270, the lowest since August 2005. The metal used to galvanise steel ended at $1,440 from $1,498. Tin tanked 13 percent to $13,000, the lowest since April 2007 and was closed at $14,050 from Thursday's last bid at $14,750.
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