METALS-Copper hits 2-week low amid U.S. debt, China demand fears

* Chinese buying to remain subdued ahead of Lunar New Year

* Fitch says U.S. could lose triple-A rating on debt wrangling

* Rio Tinto sees aluminium production drop 10 pct for 2012

LONDON, Jan 15 (Reuters) - Copper prices hit two week lows on Tuesday as investors grew concerned about a looming battle in Washington over the government's borrowing limit, and about the cloudy outlook for demand from top consumer China. U.S. President Barack Obama presented a tough negotiating stance about the debt ceiling late Monday. Given time to digest the news, investors grew concerned despite comments from the Federal Reserve that seemed to indicate the bank will stay the course on its monetary easing programme. Also a concern for metals markets is the outlook for demand from China, which consumes about 40 percent of the world's copper, and where import buying is expected to wind down ahead of the Lunar new Year holiday in February. "The Chinese have been pretty absent from the market and I think that is sending a signal that they're not participating at these levels and they don't need to either because stock levels are comfortable in China for most of the base metals," said Gayle Berry, analyst at Barclays. "They're probably going to stay absent from the market until the Chinese New Year and we are not likely to see any big buying sprees ahead of that. That ultimately is what is being a drag on markets." Three-month copper on the London Metal Exchange was down 0.66 percent at $7,947.50 a tonne, having earlier fallen to a two week intraday low at $7,940. Benchmark aluminium, zinc and lead also dropped to multi-week lows. Copper, used in power and construction hit its highest level in more than two months earlier in January following a deal by U.S lawmakers to avoid a "fiscal cliff" of spending cuts and tax increases. But prices have since retreated on fears the U.S. Federal Reserve may rein in easing measures sooner than expected and caution ahead of upcoming U.S. debt ceiling negotiations. Credit ratings firm Fitch said earlier the United States faces a "material risk" of losing its triple-A status if there was a repeat of the wrangling over raising the country's self-imposed debt ceiling.

LACKLUSTRE "The base metals complex remains under pressure this morning, with comments on the US debt ceiling by US Treasury Secretary Timothy Geithner and Barack Obama weighing on sentiment," said Standard Bank in a note. Also weighing on copper, the dollar rose versus the euro, making dollar-priced metals costlier for non-U.S. investors, while U.S. stocks opened lower amid expectations of a lacklustre earnings season. Looking ahead, investors are eagerly awaiting China's economic growth figure due later this week, which is expected to have quickened to 7.8 percent in the fourth quarter, according to a Reuters poll. "We think commodity prices are likely to rise further in the coming days. This week's release of Chinese GDP and industrial production data are key event risks due on Friday," said Credit Suisse in a note. In industry news, global miner Rio Tinto, one of the world's top three aluminium makers, said it produced 10 percent less primary aluminium in 2012 versus 2011 due to a labour dispute. Its bauxite and alumina production, both raw materials for aluminium, however, grew 11 percent and 12 percent respectively

Three-month aluminium fell 0.04 percent to $2,050 a tonne from Monday's close of $2,052. It earlier fell to a 1-1/2 month low at $2,033 a tonne. Zinc, used in galvanizing, also hit a 1-1/2 month low at $1,981.25 a tonne. It was later down 0.60 percent at $2,002 a tonne from a last bid of $1,996 on Monday. Battery material lead fell to a one-month intraday low at $2,262.75 a tonne. It later traded down 0.89 percent at $2,273.75 a tonne from $2,295 on Monday. Soldering metal tin fell down 0.18 percent to $24,705 a tonne from Monday's close of $24,750 while stainless steel ingredient nickel dropped 0.45 percent to $17,178 a tonne from $17,255, having earlier hit a two week low of $17,150 a tonne. Metal Prices at 1450 GMT Comex copper in cents/lb, LME prices in $/T and SHFE prices in yuan/T

Metal Last Change Pct Move End 2012 Ytd Pct

move

COMEX Cu 360.15 -2.45 -0.68 365.25 -1.40 LME Alum 2052.50 0.50 +0.02 2073.00 -0.99 LME Cu 7945.75 -54.25 -0.68 7931.00 0.19 LME Lead 2272.50 -22.50 -0.98 2330.00 -2.47 LME Nickel 17170.00 -85.00 -0.49 17060.00 0.64 LME Tin 24699.00 -51.00 -0.21 23400.00 5.55 LME Zinc 1983.00 -32.00 -1.59 2080.00 -4.66 SHFE Alu 15205.00 -120.00 -0.78 15435.00 -1.49 SHFE Cu* 57700.00 -820.00 -1.40 57690.00 0.02 SHFE Zin 15175.00 -280.00 -1.81 15625.00 -2.88 ** Benchmark month for COMEX copper * 3rd contract month for SHFE AL, CU and ZN

SHFE ZN began trading on 26/3/07