YORK/LONDON, March 11 (Reuters) - Lower copper stockpiles and aftershocks in Chile following last month's earthquake lifted the metal's price on Thursday, although fears that China may resort to monetary tightening limited gains.
U.S. copper futures' most active contract, May HGK0, settled up 0.90 cent, or 0.3 percent, at $3.3770 per lb on the New York Mercantile Exchange's COMEX division.
On the London Metal Exchange, copper CMCU3 also ended up 0.3 percent, or $24, at $7,464 a tonne.
"The market benefited from some mild short-covering and support from the Chilean news, though China's inflation data tempered sentiment," said Frank McGhee, head precious metals trader at Integrated Brokerage Services LLC in Chicago, who also follows copper.
A series of powerful aftershocks rocked Chile, the world's largest copper producer, in the wake of February's earthquake which briefly knocked out a fifth of its copper production. Chile's mining and refinery sectors escaped damage this time.
Falling inventories of copper added support to prices.
Copper stockpiles at LME warehouses have fallen of late, on signs of improving demand outside of China, the No. 1 copper consumer.
Latest LME data showed copper stocks fell 2,525 tonnes to 535,650 tonnes, the lowest level since late January.
"A nice story ... in that copper stocks have dropped seven or eight days in a row," Herwig Schmidt, head of sales at Europe's Triland Metals, said, describing the LME data.
A rise in canceled warrants of copper, or metal already earmarked for delivery from LME warehouses, helped prices as well. On Thursday, copper canceled warrants were at 27,100 tonnes, compared with 6,350 tonnes on Feb. 10.
Analysts said the market would be watching out for February U.S. retail sales data, due on Friday, for an updated read on global economic trends.
Chinese output data, a day after very strong import numbers, showed domestic copper production rising 16.2 percent in the first two months of the year, to 702,000 tonnes.
Prices of copper, used in power and construction, soared about 140 percent last year on a combination of improving macro data, a weaker dollar and Chinese buying.
This year, with China's consumer inflation hitting 16-month highs in February, investors are worried that the country may embark on a monetary tightening policy that could hit demand for raw materials like copper.
A raft of other economic data out of China lately has also displayed broad-based strength, bolstering the argument for monetary tightening sooner rather than later.
"Talk that China had a strong CPI number (and) that they're going to start to tighten some more ... should slow things down -- commodities in general but also copper demand," said Frank Cholly, senior market strategist at Chicago's Lind-Waldock.
Aside from copper, aluminum was another base metal that rose in Wednesday's LME trade. Aluminum CMAL3 rose $10 to $2,235 a tonne. LME stockpiles of the metal, used in transport and packaging, dipped 4,625 tonnes to an eight-month low at 4.52 million tonnes.
A large portion of LME's aluminum inventories are tied up in finance deals, to release cash for producers and earn banks higher returns than in money markets.
LME zinc MZN3=LX fell $14 to $2,346 a tonne. Steel-ingredient nickel MNI3=LX dropped $115 to $21,335 a tonne and battery material lead MPB3=LX was flat at $2,280. LME tin MSN3=LX fell $200 to $17,450.