| NEW YORK/LONDON
NEW YORK/LONDON Copper fell for the first time in four days on Thursday, on track for its worst quarterly performance since Q3 2011, as global growth prospects dimmed largely on the back of Europe's spiraling debt crisis.
Volumes slowed as pessimistic investors took to the sidelines in front of a European Union summit many fear will not succeed in easing the region's debt crisis that has eaten into metals demand and affected the global economy.
EU leaders opened the summit Thursday as divided as ever on how to resolve the debt crisis, with Germany showing little willingness to back other countries' debts as finance officials work on short-term ways to stabilize Spanish and Italian borrowing costs.
"Nobody in the world has a solution to Europe, and if they did, they would have stepped forward by now," said Adam Sarhan, chief executive of Sarhan Capital.
"Until we find a unified solution to this ... a solution that can be implemented across the board, we're going to see a continued threat to the global economy."
London Metal Exchange (LME) benchmark three month copper fell $20 to end at $7,385 a tonne, surrendering an earlier rally in Asian trade to $7,449.50.
In New York, the active September COMEX contract shed 2.50 cents to settle at $3.3315 per lb, after dealing between $3.3160 and $3.3675.
COMEX copper volumes slowed to 63,500 lots in late New York business, more than 20 percent below the 30-day norm, according to preliminary Thomson Reuters data.
"The Germans we know are not going to back common (EU) debt. Metals are very macro sensitive and have been completely battered by broader market risk aversion," Andrey Kryuchenkov, an analyst at VTB Capital, said.
Copper has slid about 13 percent so far this quarter and is down 4 percent this year. Open interest in the London copper market is down near its lowest level in nearly 3 years.
Still, the market has moved into backwardation with nearby prices more expensive than later-dated contracts -- an indication of some physical tightness.
Cash copper was at a premium to three months of up to $21 on Wednesday compared with a discount of $10 early last week.
"In the long run, copper should benefit from a seasonal demand recovery in China in the second half. We've already seen shrinking bonded warehouse stocks in Shanghai. But for people to buy this story, we need to have an improvement in macro sentiment," Kryuchenkov said.
Meanwhile, U.S. data offered little support on Thursday. Consumer spending and export growth came in below expectations in the first quarter, though jobless claims fell last week and first-quarter economic growth numbers met market expectations.
COPPER DRAWDOWNS IN CHINA
In China, the most-active October copper contract on the Shanghai Futures Exchange gained 0.9 percent to close at 54,200 yuan ($8,500) per tonne.
Copper is trapped within a narrow range due to longer-term worry about the global economy and demand from top consumer China, which is still largely sluggish, said a Shanghai-based trader, pegging technical resistance near $7,500 and support at $7,250 to $7,300.
But expectations were high for more copper drawdowns from Chinese bonded warehouses due to cheaper prices and an improved LME-Shanghai arbitrage. LME three-month copper traded at a premium of 369 yuan on Thursday, well below the nearly 4,000 yuan in early May.
In London, three-month aluminum fell $27 to close at $1,845 a tonne after Shanghai aluminum futures rebounded by 2 percent.
The gains in China came as losses in previous days were regarded as overdone. The sell-off followed news that China's top aluminum-producing province had cut the electricity fees of smelters in a bid to revive output.
In Australia, Rio Tinto said its Bell Bay aluminum smelter reached a new power supply deal to secure its long-term future.
Galvanizing metal zinc bucked the trend, closing up $38 at $1,794 a tonne, bouncing back after six days of losses that pushed the price down 7.6 percent.
The move also came as LME data showed 113,925 tonnes of net inventory cancellations. LME zinc stocks have surged 21 percent this year to 995,425 tonnes.
(Additional reporting by Carrie Ho in Shanghai and Maytaal Angel in London; editing by Keiron Henderson and Jane Baird)