NEW YORK/LONDON, Jan 20 （Reuters） - Copper collapsed on Thursday in its biggest one-day loss since mid-November as a stronger dollar added to early pressure from fears of monetary tightening in China, the world's biggest consumer of the metal.
The bearish onslaught spread through the broader industrial metals complex in London, dragging lead down 3.7 percent, zinc 2.5 percent and aluminum to its lowest level since Dec. 21.
A sharp jump in China's annual growth rate and a smaller-than-expected slowdown in December inflation pressures fed expectations of further policy tightening measures which could hurt the country's demand for base metals.
"The market is worried that China may be overheating and will have to mitigate that with much-tighter monetary policy," said Bart Melek, Global Commodity Strategist with BMO Nesbitt Burns in Toronto.
London Metals Exchange （LME） copper for three-month delivery ended at $9,355 per tonne after falling to a one-month low of $9,281, $500 below Wednesday's record peak of $9,781.
COMEX copper for March delivery sank 9.80 cents, or 2.2 percent, to settle at $4.2720 per lb.
DATA DOES NOT HELP
Even an unexpected surge in U.S. existing home sales and a bigger-than-expected drop in jobless claims failed to limit the damage caused by China's fourth-quarter figures.
"The jobless claims and home sales should have helped provide some support, but I think the move is still primarily driven by worries about monetary tightening in China," Standard Chartered analyst Daniel Smith said. "That is still in the forefront of people's minds."
The U.S. data gave a broad lift to the dollar, which added further price-pressure to the complex by making industrial metals more expensive for holders of other currencies.
Mixed trends in LME inventory flows at the start of the year, coupled with some disappointing corporate earnings results in the United States and ongoing uncertainties in the euro zone, contributed to the correction, analysts said.
LME copper stocks fell 1,225 tonnes to 380,525 tonnes, edging back from a recent rise that has slightly dented sentiment toward demand.
Still, the red metal's medium-term fundamental support remained fully intact.
"The key thing to look out for is China's return to the market," said Nicholas Snowdon, base metals analyst with Barclays Capital in New York.
"It's almost inevitable that at some point during the second quarter 2011, after the New Year holiday, the Chinese will have to move towards restocking. That will be the catalyst needed to provide renewed upward sustained momentum in prices.
"Until we have that, we are going to remain in this sort of rangebound territory," he said.
CHINA PRODUCTION
Meanwhile, China's production of base metals is expected to rise this year after it finished 2010 strongly with copper and nickel hitting monthly record highs in December and tin reaching a 17-month high.
LME lead stocks continued to rise, last climbing 2,425 tonnes to 264,350 tonnes.
The backwardation on lead -- a premium for cash material over the three-month contract -- was at $23 a tonne, down from $31 the day before and versus a contango of 50 cents in late December -- a discount for cash over three-month material.
Data out Thursday showed a dominant position controlling 80-90 percent of stock warrants and cash contracts on LME lead, edging down after data on both Tuesday and Wednesday showed a dominant position holding more than 90 percent. Traders said the position would have a limited effect on prices.
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