* Copper declines, erasing Friday's increases * Markets concerned with Europe's ability to pull out of debt crisis * London copper heads for annual decline, snapping two annual gains (Adds comments, updates prices) By Jane Lee KUALA LUMPUR, Dec 12 (Reuters) - London copper prices fell on Monday, erasing some of the previous session's gains, as scepticism about Europe's moves towards fiscal union offset optimism that China's appetite for the metal will grow. Three-month copper on the London Metal Exchange declined 1.2 percent to $7,719.75 a tonne by 0316 GMT, after a gain of 1.4 percent on Friday. Prices ended 1 percent lower last week. "Europe is the key drag on consumption," said Song Seng Wun, regional economist at CIMB Research Pte in Singapore. "It's still a cautious demand story, both domestically in China and what's happening in the global markets." The European Union's leaders agreed after a two-day summit to pursue closer economic ties and stricter budget discipline in the euro zone but Britain refused to join the pledge. Asian stocks gained and the euro steadied on Monday after the European deal, but caution may return as the region's leaders failed to ally fears the fragile safety net is sufficient to contain the debt crisis. The most-traded February copper contract on the Shanghai Futures Exchange slipped 0.3 percent to 56,930 yuan a tonne. China's copper imports in November reached their highest level since March 2010, rising 17.9 percent on the month to 452,022 tonnes, preliminary data from China's General Administration of Customs showed on Saturday. The increase in purchases came after prices had fallen, making it cheaper for the world's largest copper user to boost stockpiles. China produced 448,000 tonnes of refined copper in November, down 4.5 percent on the month, according to data from the National Bureau of Statistics on Friday, with domestic prices also falling. Concern that China's economic expansion may falter as Europe's debt crisis spreads has driven London copper prices down by 20 percent this year, snapping two annual gains. China's annual economic growth is likely to slow to 8.5 percent in 2012, an academic adviser to the country's central bank said in remarks published on Monday. Li Daokui, a professor at Tsinghua University, said Beijing could boost spending on basic infrastructure if the government sees any risk of annual economic growth slipping below 8 percent next year, according to a report published on the news portal website sina.com.cn. The latest Reuters poll showed that economists expect China's economy to grow by 8.6 percent in 2012, after an estimated expansion of more than 9 percent this year. Declines in copper prices may be limited as an Indonesian workers' union plans to extend a three-month strike at Freeport McMoRan Copper & Gold's Grasberg mine until Jan. 15, union official Virgo Solossa told Reuters on Saturday. Grasberg is the world's second-largest copper mine. Chinese copper smelters aim to convince BHP Billiton, the majority owner of the world's biggest copper mine, to agree to higher treatment and refining charges set by rival Freeport McMoRan for 2012, trading sources said. PRICES Base metals prices at 0316 GMT Metal Last Change Pct Move YTD pct chg LME Cu 7719.75 -95.25 -1.22 -19.59 SHFE CU FUT FEB2 56930 -140 -0.25 -20.77 LME Alum 2062.50 -2.50 -0.12 -16.50 SHFE AL FUT FEB2 16150 10 +0.06 -4.10 HG COPPER MAR2 350.60 -5.20 -1.45 -21.03 LME Zinc 1990.00 -13.00 -0.65 -18.91 SHFE ZN FUT MAR2 15610 -50 -0.32 -19.85 LME Nickel 18430.00 -170.00 -0.91 -25.54 LME Lead 2140.00 -25.00 -1.15 -16.08 SHFE PB FUT 15650 50 +0.32 -14.71 LME Tin 20275.00 25.00 +0.12 -24.63 LME/Shanghai arb 509 Shanghai and COMEX contracts show most active months ^ LME 3-m copper in yuan, including 17 pct VAT, minus SHFE third month

Source