LONDON, March 11 (Reuters) - Copper slipped on Thursday as production and inflation data from China, stoked investor concerns of further monetary tightening in the world's top metals consumer.
By 1051 GMT, copper for three month delivery CMCU3 on the London Metal Exchange was at $7,404 a tonne from $7,440 at the close on Wednesday and compared with a session low at $7,356.
Chinese consumer inflation spurted to a 16-month high in February, giving potential grounds for tightening policy sooner rather than later. [ID:nTOE6290B5]
"China is the driver with concerns over lending, and will knock on to metals prices," said Carl Firman, an analyst at Virtual Metals. "Nobody expects Chinese demand growth to be as strong as last year but any further tightening of lending will impact, especially with the U.S and Europe still on the road to recovery."
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. [ID:nTOE62907G]
For a graphic of Chinese output, click: here
Used in power and construction, copper soared by about 140 percent last year, as a combination of improving macro data, a weaker dollar and Chinese buying, boosted prices.
Investors are hopeful that fresh demand from both the United States and Europe, as economic conditions improve, will assist base metal prices this year, should Chinese demand ease.
Market participants have pointed to a recent trend of drawdowns in LME inventories as a sign that demand outside China is improving. [ID:nLDE6291ED]
Copper stocks fell 2,525 tonnes to 535,650 tonnes -- the lowest level since late January.
Aluminium CMAL3 traded at $2,231 versus $2,232. LME stocks for 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 those aluminium stocks are tied up in finance deals, to release cash for producers and to earn banks higher returns than they would get in money markets. [ID:nGEE5BA277]
Also helping cap losses, was a rise in cancelled warrants -- material already earmarked for delivery from LME warehouses.
On Thursday, copper cancelled warrants were at 27,100 tonnes, compared with 6,350 tonnes on February 10.
Analysts say that despite improving macro data, Euro zone debt worries have caused economic uncertainty, leading to volatile commodity prices.
"It is partly because you have a multi-speed recovery," said Jesper Dannesboe, senior commodity strategist at Societe Generale. "You have emerging markets doing very well, Europe and Japan doing quite badly, the U.S. doing OK, in terms of recovery.
"It means that the economic data coming out, is not going to show just one story but two ... our strategy is that we're moderately bullish on commodities but you have to buy the dips."
In other metals, steel making ingredient nickel CMNI3 traded at $21,275 from $21,520 while battery material lead CMPB3 was at $2,260 from $2,289.
Zinc CMZN3 traded at $2,332 a tonne from $2,376 and tin CMSN3 was at $17,550 from $17,750.
Metal Prices at 1052 GMT Metal Last Change Pct Move End 2009 Ytd Pct
move COMEX Cu 335.00 -0.50 -0.15 332.75 0.68 LME Alum 2228.00 -4.00 -0.18 2230.00 -0.09 LME Cu 7405.00 -35.00 -0.47 7375.00 0.41 LME Lead 2255.00 -34.00 -1.49 2432.00 -7.28 LME Nickel 21230.00 -290.00 -1.35 18525.00 14.60 LME Tin 17425.00 -325.00 -1.83 16950.00 2.80 LME Zinc 2329.00 -47.00 -1.98 2560.00 -9.02 SHFE Alu 16720.00 -180.00 -1.07 17160.00 -2.56 SHFE Cu* 59230.00 -1170.00 -1.94 59900.00 -1.12 SHFE Zin 18695.00 -480.00 -2.50 21195.00 -11.80 ** 1st contract month for COMEX copper * 3rd contract month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07
