* Volumes subdued to holidays in China and Europe
* Tin backwardation persists, stands at around $150/T
* LME/ShFE arb: http://tmsnrt.rs/2oQ5nm2 (Recasts, adds comment, updates prices)
LONDON, May 25 (Reuters) - Copper prices hit three-week highs on Thursday as worries about prolonged disruptions at the giant Grasberg copper mine in Indonesia triggered short-covering before a long holiday weekend in Europe and top consumer China.
Benchmark copper on the London Metal Exchange was up 0.9 percent at $5,734 a tonne at 1426 GMT from an earlier $5,768.50, its highest since May 3.
"People are talking about a drawn out strike at Grasberg ... The market isn't very liquid and profit-taking is having a disproportionate affect," a copper trader said.
"Ultimately though it will depend on what's going on with Chinese growth and demand, which isn't looking overly healthy."
HOLIDAYS: The Dragon Boat Festival in China on Monday and Tuesday and public holidays in much of Europe on Monday have subdued volumes in industrial metals markets.
INDONESIA: An estimated 9,000 workers at Grasberg operated by Freeport McMoRan will extend a strike for a second month, a union official said last Saturday, in an ongoing dispute over employment terms and layoffs.
DOLLAR: A weaker U.S. currency makes dollar-denominated commodities cheaper for non-U.S.-firms, which could potentially boost demand for metals.
CHINA DOWNGRADE: Moody's downgraded China's credit rating for the first time in nearly 30 years, saying it expects the financial strength of the economy to erode in coming years as growth slows and debt continues to rise.
CHINA CREDIT: "Much of the price weakness in copper is because of the tighter credit situation in China," said Ingrid Sternby, senior research analyst at Blenheim Capital Management. "When this reverses the Chinese speculative community will look at copper in a more positive light."
CHINA DEMAND: China accounts for nearly half of global copper demand estimated at around 23 million tonnes this year.
COPPER TECHNICALS: Resistance around the 100-day moving average at $5,790 and support at $5,625, around the 21-day moving average.
ALUMINIUM SUPPLY: Focus in the aluminium market is on plans by Chinese authorities to clampdown on polluting industries. China produces more than half of the world's aluminium, estimated at around 60 million tonnes this year.
ALUMINIUM PRICES: Three-month aluminium rose 0.3 percent to $1,950 a tonne, within sight of the $1,981 hit in March, its highest since Dec 2014.
TIN STOCKS: At 2,060 tonnes, stocks of tin in LME warehouses are at their lowest since May 1989. Benchmark tin rose 0.7 percent to $20,515 a tonne.
TIN SPREAD: Tight supplies on the LME market have created a hefty premium for the cash over the three-month contracts <MSN0-3>, which at around $150 a tonne is close to Tuesday's $180 a tonne, the highest since Dec. 2016.
PRICES: Zinc gained 0.3 percent to $2,643, lead was up 0.1 percent to $2,079 and nickel added 0.4 percent to $9,135.
(Editing by David Evans and Edmund Blair)