Copper eased on Monday as the dollar rallied on concerns that Greece had yet to agree on the terms of a new bailout to avoid debt default and on continued lacklustre demand from top consumer China.

Three-month copper on the London Metal Exchange dropped almost 1 percent to trade at $8,489 a tonne by 16:37 SA time from $8,575 at the close on Friday, when copper hit a one week-high of $8,598.50.

The dollar rose versus the euro, making dollar-priced metals costlier for European investors, as a deadline loomed for Athens to tell the European Union whether it would accept the terms of a new 130 billion euro ($170.6 billion) bailout.

“The longer this Greek situation drags on the more disruptive it is for the market,” said INTL FCStone analyst Edward Meir.

“They really need to sort it out; it was supposed to be solved 2 weeks ago. It is feeding through the markets, pushing the dollar up and commodities down.”

Greek coalition parties have yet to approve the terms of a second bailout package. A meeting of Greek political leaders to discuss reforms under the package has been postponed by a day to Tuesday..

The US dollar is seen as a safe haven asset while commodities such as metals are perceived as riskier and are therefore generally sold if investors feel the global economic or financial picture is deteriorating.

Looking at fundamentals, copper supply was poised to remain quite tight this year.

The world's No.1 copper producer, Chilean state giant Codelco, will struggle this year to match record 2011 copper output of 1.735 million tonnes, CEO Diego Hernandez said in the El Mercurio newspaper's Sunday edition.

Worries about demand growth however were strong, market analysts said.

“Fundamentals are quite weak, especially in China, real demand is just not there,” said Standard Bank analyst Marc Ground. “Perhaps the market is catching up to that idea.”

The physical market for copper in China was quiet on Monday, a trader based in Hong Kong said, as factories started to reopen this week after the Lunar New Year holidays.

CHINESE DEMAND

Signs in Chinese futures markets still pointed to slack spot market demand, with the front month SHFE contract trading at a steep discount of 730 yuan to the most active April contract, compared with a 660 yuan discount on Friday.

“The degree of end demand pick-up post Chinese New Year will be key, but with manufacturing output still seemingly running ahead of consumption and the key property sector looking subdued, we believe the price may have to trade back towards $8,000 per tonne to attract interest,” said Macquarie analysts in a note.

Limiting losses in copper was Friday's confidence-boosting US jobs data, which showed the world's biggest economy created jobs at the fastest pace in nine months in January. That took the unemployment rate to a three-year low of 8.3 percent.

In other metals, packaging metal aluminium was at $2,224.50 a tonne from $2,247. LME data showed stocks rose 30,525 tonnes to hit a new record of 5.02 million tonnes, most of which is held in financing deals and unavailable to the market.

Soldering metal tin was at $24,450 a tonne from $24,400, while zinc, used to galvanize steel, was at $2,135 from $2,155 and battery material lead, was at $2,195 from $2,225.

Stainless-steel ingredient nickel was at $21,361 from $21,305. - Reuters