Dec 14, 2011 NEW YORK (Dow Jones)--Copper futures plunged to their lowest levels in almost three weeks on Wednesday as escalating worries about Europe's debt crisis sent investors cashing out of the industrial metal.

The most actively traded contract, for March delivery, fell 16.30 cents, or 4.7%, to settle at $3.2785 pound on the Comex division of the New York Mercantile Exchange. That's the lowest settlement for the most widely traded contract since Nov. 25.

Copper tracked the euro lower as the common currency dropped below the key $1.30 level and hit an 11-month low. Italy's borrowing costs climbed to euro-era highs, raising concerns that the euro-zone's third-largest economy won't be able to manage its debt load.

Copper is sensitive to the economic outlook because of its widespread uses in construction and manufacturing. Prices have tracked investor sentiment toward Europe's debt crisis on the view that a credit crunch there could hit world demand for raw materials.

"The big fear is where is demand going to come from for metals products?" said Frank Lesh, a broker with FuturePath Trading. "World economies are indeed slowing."

Crude oil futures also fell sharply, and Comex gold settled down 4.6%, breaking below $1,600 a troy ounce.

Copper fell on Tuesday, and extended its losses in post-settlement trade after the Federal Reserve held to its previously announced policies, disappointing market participants hoping the central bank would take steps to boost the economy.

Traders have "resigned themselves to the fact that the (euro-zone) crisis is as bad as its ever been, the real global economy is slowing and the cavalry, be they the Chinese or the Fed, are still preoccupied with their own problems," said Leon Westgate, an analyst with Standard Bank, in a note.

World copper production outstripped supply by 343,400 tons during the first 10 months of the year, the World Bureau of Metal Statistics said Wednesday, up from a 236,800-ton surplus recorded through September.

Many market participants at the beginning of the year forecast a large deficit in the global copper market in 2011, and that expectation helped send prices to record highs in February before slumping economic growth took a toll on demand.

The copper market can expect a further boost to supply after the resolution of a high-profile labor strike that had stopped production at one of the world's top copper mines.

Freeport-McMoRan Copper & Gold Inc. (FCX) said on Wednesday that the company had reached an agreement with striking workers at its Indonesian unit. Copper shipments from Freeport's Grasberg mine were suspended in October, and the company said it expected a return to full operations early next year.

Copper settlements (ranges include electronic and pit trading):
Dec $3.2710; down 16.15 cents; Range $3.2520-$3.4095
Mar $3.2785; down 16.30 cents; Range $3.2565-$3.4260