METALS-Copper hits 2-week low on China monetary policy

* Dollar rises against major currency basket

* Copper warehouse stocks fall further

* Coming up: U.S. Federal Reserve policy meeting
(Recasts with closing COMEX copper price, adds New York dateline/byline and
analyst comments)

By Chris Kelly and Michael Taylor

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. [ID:nTOE62D001] [ID:nTOE6290B5]

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/]

CHILE SUPPLY

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.
[ID:nN15167496]

"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.

Metal Prices at 1903 GMT
Metal Last Change Pct Move End 2009 Ytd Pct

move
COMEX Cu 330.55 -6.40 -1.90 334.65 -1.23
LME Alum 2225.00 -35.50 -1.57 2230.00 -0.22
LME Cu 7290.00 -174.00 -2.33 7375.00 -1.15
LME Lead 2195.00 -70.00 -3.09 2432.00 -9.75
LME Nickel 21525.00 -225.00 -1.03 18525.00 16.19
LME Tin 17400.00 -150.00 -0.85 16950.00 2.65
LME Zinc 2336.00 1.00 +0.04 2560.00 -8.75
SHFE Alu 16670.00 -245.00 -1.45 17160.00 -2.86
SHFE Cu* 58380.00 -1210.00 -2.03 59900.00 -2.54
SHFE Zin 18495.00 -560.00 -2.94 21195.00 -12.74
** 1st contract month for COMEX copper * 3rd contract month for SHFE AL, CU and
ZN SHFE ZN began trading on 26/3/07

(Additional reporting by Rebekah Curtis in London; editing by Sue Thomas)