NEW YORK/LONDON (Reuters) - Copper posted its sharpest decline in two weeks on Tuesday as the dollar strengthened and concerns about the scale of China's economic slowdown escalated, setting prices of the industrial metal back into a familiar range.
Down about 2 percent, copper stood near the bottom of the biggest losers within the 19-commodity Thomson Reuters-Jefferies CRB Index .CRB as further proof of softening raw materials demand from China, which accounts for 40 percent of global copper consumption, led investors to unload some length.
Fueling the downside push was news that BHP Billiton (BHP.AX), the world's largest miner, was seeing signs of "flattening" iron ore demand from China.
"There is a variety of things affecting prices today including ongoing concerns about Chinese demand and worries about higher oil prices, which are not good for growth prospects," said Natixis head of research Nic Brown.
London Metal Exchange (LME) three-month copper touched a session trough at $8,383 per tonne, its lowest level since March 6, before closing at $8,430 per tonne, down $140.
In New York, the May COMEX contract slumped 7.85 cents, or 2 percent, to settle at $3.8305 per lb, after dealing between $3.8135 and $3.91.
Volumes remained on the light side, with about 45,700 traded in late New York business -- down by more than a third from the 30-day norm, according to preliminary Reuters data.
Prices hit their highest level in two weeks at $8,690 and $3.94 on Friday, and are up around 10 percent this year, but have remained mired in a trading range for the better part of the first quarter.
"Prices have more or less remained rangebound since the end of January. It's clearly the sort of tension between relatively positive developments in macro data versus continued softness in the Chinese market," said Nicholas Snowdon, analyst with Barclays Capital in New York.
"The potential to break to the downside or upside is largely going to be leveraged to how the picture evolves in China, both in the physical market and at a macro level."
Official Chinese data last week showed home prices fell in February for a fifth consecutive month, and the government reaffirmed its commitment to measures to control the property market and cool speculation.
Chinese copper demand has not picked up after the Lunar New Year holiday in late January, prompting importers to delay some term shipments, traders have said.
Also weighing on base metals was the dollar, which rose against a basket of currencies as risk sentiment soured, partly because of concerns that a slowdown in China could hit global growth. .DXY
Gains in the dollar can pressure dollar-denominated commodities by making them more expensive for consumers using other currencies.
On a more positive note, although U.S. housing starts fell last month, permits for future construction jumped to their highest level since October 2008, according to a government report that showed steady improvement in the housing market.
In other metals, nickel ended flat at $19,050 a tonne. It is the worst performing base metal in the complex so far this year and is up around 1 percent, compared with copper's 10 percent rise.
"Exchange inventories have risen over 8 percent and Chinese premiums remain weak," RBC Base Metals said about nickel in a research note. "That said, a move below $18,000 will begin to see a supply-side response."
CRB Index graphic: link.reuters.com/naw27s
COMEX copper technicals: link.reuters.com/qew27s
Global metal stocks: link.reuters.com/neg67n
LME aluminum prices: link.reuters.com/kut27s
Aluminum fell $30 to close at $2,245 a tonne.
LME stocks held near record highs at more than 5 million tonnes, but most of the metal is locked up in financing deals and not available for sale.
Talks are under way to end a three-month lockout of workers at Rio Tinto Alcan's (RIO.L) (RIO.AX) giant Alma aluminum smelter in northern Quebec as the two sides were summoned to the negotiating table this week.
Metal Prices at 1846 GMT
Metal Last Change Pct Move End 2011 Ytd Pct
COMEX Cu 383.70 -7.20 -1.84 343.60 11.67
LME Alum 2244.00 -31.00 -1.36 2020.00 11.09
LME Cu 8430.00 -140.00 -1.63 7600.00 10.92
LME Lead 2013.00 -95.00 -4.51 2035.00 -1.08
LME Nickel 19050.00 0.00 +0.00 18710.00 1.82
LME Tin 23415.00 -180.00 -0.76 19200.00 21.95
LME Zinc 2034.00 -45.00 -2.16 1845.00 10.24
SHFE Alu 16265.00 -10.00 -0.06 15845.00 2.65
SHFE Cu* 60350.00 50.00 +0.08 55360.00 9.01
SHFE Zin 15885.00 10.00 +0.06 14795.00 7.37 ** Benchmark month for COMEX copper * 3rd contract month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07
Additional reporting by Silvia Antonioli; editing by Anthony Barker and Jim Marshall