NEW YORK/LONDON, May 5 (Reuters) - Industrial metals hit multi-month lows on Wednesday on liquidation sparked by fears of contagion from the Greek fiscal crisis, slumping stock markets and worries about metals demand from top consumer China.
Benchmark copper CMCU3 on the London Metal Exchange fell as low as $6,632.75 a tonne, the lowest since Feb. 10. The metal used in power and construction traded at $6,959 a tonne in official rings from $7,030 a tonne at the close on Tuesday.
Nickel CMNI3 tumbled more than 10 percent on the LME's electronic trading system Select to a day's low of $20,701 -- its lowest level since late February and on Select was on track for its biggest one-day fall since January 2009.
"It's worries that the Greek problems may spill over to other countries," said Daniel Smith, an analyst at Standard Chartered. "There's a big panic taking place about the whole outlook," he said of the base metals complex."
Three people died during anti-austerity protests in Greece, and European leaders warned that the euro zone debt crisis could spread. Stocks and the euro fell.
Money markets showed signs of strain as Greece's problems renewed worries about the banking system's health, although the situation was not nearly as dire as it was at the height of the credit crunch.
The euro hit a 14-month low versus the dollar, making metals costlier for holders of the European currency.
"Risk aversion is building, I am now convinced this is a real correction, rather than what we saw in February," said Deutsche Bank analyst Dan Brebner.
"Participation in industrial metals by hedge funds and investors is likely to decline. We will start to see more commercial players...aluminium smelters selling forward, auto makers buying forward."
Analysts said consumers and producers will become more prominent in metals markets as they try to cut risks by locking in current prices.
Investors also fear demand from China, the world's largest consumer of industrial metals, could fall because of monetery tightening to rein in inflationary pressures.
"There's a lot of concern now that they've been continuing to raise capital and margin requirements, raising interest rates in China. What they're trying to do is slow the economy down," said Shawn Hackett, president of Hackett Financial Advisors in Florida.
U.S. copper futures for July delivery HGN0 settled down 2.70 cents at $3.1515 an ounce.
AUSTRALIA MULLS MINING TAX
Markets are also waiting to see the fallout from Australia's proposal to impose a 40 percent tax on mining profits from July 2012.
"Potentially, the tax could be bullish for industrial metals and iron ore prices in the long run, as some future domestic projects will no longer seem viable," VTB capital said.
Also bullish for copper and aluminium are falling stocks in LME warehouses. Copper stocks at 493,275 are down nearly 60,000 tonnes since the middle of February. Aluminium stocks have fallen more than 122,000 tonnes to 4.518 million tonnes since hitting a record high above 4.640 million tonnes in January.
Aluminium CMAL3, used in transport and packaging, was at $2,121 a tonne from $2,165 at Tuesday's close and hit its lowest level since mid-February, at $2,062.
Zinc CMZN3 tumbled to $2,001 a tonne, its lowest since February 8. It traded at $2,125 a tonne in rings from $2,060.
Tin CMSN3 was at $17,550 from $17,850 and lead CMPB3 was at $1,940 from $2,060.
Battery material lead hit a day's low of $1,871, its lowest since early September.
Nickel closed at $21,925 in rings from $24,650. The stainless steel ingredient is pressured by perceptions demand may have been overestimated and expectations that a large amount of nickel pig iron will find its way to the market this year.