METALS markets in Shanghai fell by their 4 per cent downside limits on Monday after week-long holidays, following a turbulent week that saw London copper record its biggest-ever weekly fall.

Demand worries and growing evidence of a slowdown in world economic growth are weighing on most industrial raw materials.

The Reuters/Jefferies CRB index shed more than 10 per cent, its biggest-ever weekly drop and oil recorded its largest seven-day slip in four years.

The latest blow came from US payrolls data for September on Friday, which showed their steepest rate in 5-and-a-half years.

The most active Shanghai copper contract, December, fell 2,150 yuan (S$458), its lowest from February 2007, from the previous settlement on Sept 26, to 51,210 yuan a tonne. Aluminium and zinc also shed 4 per cent at the start of trade to 14,905 yuan and 13,670 yuan, respectively.

Shanghai aluminium is at its lowest in almost five years, while zinc is at its weakest since August and was likely to slip below its record low of 13,355 yuan in the next session.

Shanghai copper should see another limit down day on Tuesday, unless London futures manage a heroic turnaround.

'Copper should also fall by its limit tomorrow, which will be raised to 5 per cent, but I am not so sure about zinc, which might have a little room to trade,' a dealer in Shanghai said.

'I think December copper will bottom out around 48,000 yuan. That will attract some consumers but many more will wait to see how much more LME can fall before buying in larger quantities.'

While Shanghai was closed, London Metal Exchange copper lost 15 per cent as investors tumbled out of commodities, driven by a surge in the dollar and growing worries that demand was slowing significantly.

On Monday, LME copper fell 4 per cent to US$5,770 (S$8,432) by 0344 GMT (11.44am Singapore time), holding above the previous session's low of US$5,680, its weakest since February 2007, and more losses may be in store.

'We have lowered our forecast for cash copper in the fourth quarter to $5,500,' analyst Yingxi Yu at Barclays Capital said.

She said the difference between the price of copper on the LME and the cost of production remained wide, giving copper potential to fall further before producers shut down operations.

'If you look at copper in relation to other base metals, prices are still much higher than the marginal cost of production than other metals.'

She said the marginal cost of production was around US$3,100 a tonne, but added the market remained tight and prices were unlikely to fall that far.

The passage of a US$700 billion bailout bill by US lawmakers on Friday did little to lift copper, but analysts said perceptions of the macroeconomic outlook, and how the bailout package will affect the broader economy, would be key influences on commodity price direction.

The gap between Shanghai's third-month copper futures versus the London benchmark, including China's 17 per cent value-added tax, moved into a premium of 4,648 yuan from a discount of 2,022 yuan before the break.

Dealers said the premium would narrow as Shanghai caught up with the steep decline in London, but it was hard to say whether it could be sustained. In early September, the difference flipped into a premium for the first time since January, before reversing after a couple of weeks.

LME aluminium fell US$39 or 1.7 per cent to US$2,300, while zinc shed almost 2 per cent.

'Most smelters in China are not making money at these prices, while on a global basis, prices are close marginal costs,' Yu said. -- REUTERS