NEW YORK/LONDON, March 15 (Reuters) - Copper prices slumped to their lowest levels in two weeks on Monday, weighed down by a combination of U.S. dollar strength and growing concerns that China will take further steps to tighten monetary policy.
Copper for May delivery HGK0 on the New York Mercantile Exchange's COMEX division sank 6.50 cents, or 1.9 percent, to settle at $3.3150 per lb, its lowest close since Feb. 26.
On the London Metal Exchange (LME), copper for three-months delivery MCU3 closed at $7,310 a tonne, down from $7,440 on Friday. It earlier touched $7,255.00, its lowest level since March 2.
Concerns that rising inflation in China would spur the world's largest copper consumer to tighten its monetary policy and reign in excessive growth eroded market sentiment.
"They are the ones who put us up here, and they are the ones that are taking it down," said Craig Ross, vice president of ApexFutures.com in Chicago.
"All eyes are on China when it comes to the copper, and that is exactly what
we are seeing," Ross said.
Chinese buying helped copper prices surge some 140 percent last year. China's Premier Wen Jiabao on Sunday expressed worry about inflation, while investors were also worried about a currency spat between China and the United States.
But analysts said that even if China does rein in monetary policy, its policy will remain accommodative enough for its metals demand to remain robust.
"The inflation (problem) will be relatively temporary," Daniel Smith, an analyst at Standard Chartered, said. "This year will be good overall. We're pretty upbeat in terms of Chinese demand for base metals."
Commodities had their weakest performance, as measured by the CRB index .CRB, in over a month last week on worries about China's policy changes and after patchy economic data.
Additional pressure was seen from the currency markets, where a lack of concrete progress on a financial aid package for debt-strapped Greece drove the dollar up against the euro.
A stronger dollar makes metals priced in the U.S. currency more expensive for non-U.S. investors. [USD/]
Investors are keeping a keen eye on production from Chile after a series of supply disruptions in recent weeks in the top copper producing country.
Key mines in Chile resumed operations after energy supply returned on Monday following a near country-wide blackout that impacted production for several hours, just two weeks after an earthquake temporarily hit supply.
"They had a major blackout. Is this going to be the only one? I doubt it," said Robin Bhar, an analyst at Credit Agricole CIB. "There will be further supply disruptions."
A recent fall in stocks at LME warehouses has supported sentiment in the market, however. Stocks of copper fell 1,375 tonnes on Friday to 531,200 tonnes -- their lowest since late January after consistently falling in March.
"We expect continued LME withdrawals to see copper continue to trade at high levels in the shorter term," Macquarie said in a note, adding that Chinese demand had "picked up strongly" over the past week. Aluminum CMAL3 fell to $2,227 from $2,260.50. Zinc, used to galvanize steel, earlier hit $2,265.75, its lowest point since March 5.