METALS-Copper revisits 2-week lows as Fed rally peters out

* Dollar recovers from 11-month lows, erodes metals prices

* Rio Tinto sees aluminium production drop 10 percent for 2012

* But alumina, bauxite output up on 3rd party demand, Rio says

* Coming up; Germany 2012 GDP at 0800 GMT

(Adds comment, detail, updates prices) SINGAPORE, Jan 15 (Reuters) - London copper slunk back to two-week lows on Tuesday as the dollar gained against the euro and wiped out an early rally after the U.S. Federal Reserve chief urged lawmakers to lift the debt ceiling to avoid a potentially disastrous debt default. The dollar bounced against the euro, recovering from an 11-month low hit after Fed Chairman Ben Bernanke's remarks.

A stronger greenback makes dollar-priced commodities such as copper less attractive for buyers holding other currencies. Still, an improving economic outlook in the two top consumers of industrial metals, China and the United States, was cushioning prices, said Henry Liu, head of commodity research at Mirae Asset Securities in Hong Kong. "From a fundamental perspective we should be more optimistic," he said. "The U.S. economy is rebounding... local governments in China are still trying to put some money into infrastructure so we are still going to see some mild rebound, and we are still positive for the copper price for the remainder of the year," he added. Three-month copper on the London Metal Exchange eased to $7,975 a tonne by 0703 GMT, down by 0.31 percent from the previous session when it fell around half a percent. Copper earlier plumbed a new two week low at $7,972 a tonne. Mirae Asset Management said copper prices could find strong resistance in the first half at $8,500 a tonne. Copper prices have struggled to find traction since hitting two-and-a-half-month highs above $8,250 a tonne in early January due to worries about global economic health, and the U.S. borrowing limit, or debt ceiling, in particular. "Copper was up on a bit of faux positivity on the back of Bernanke's speech last night which led the bounce this morning but no real conviction here. I expect copper to fill the gap down to $7,970," said a Singapore based trader. President Barack Obama on Monday rejected any negotiations with Republicans over raising the U.S. borrowing limit, accusing his opponents of trying to extract a ransom for not ruining the economy in the latest fiscal fight. The most-traded April copper contract on the Shanghai Futures Exchange fell 1.4 percent to finish at 57,700 yuan ($9,300) a tonne. China is the world's top copper consumer, accounting for around 40 percent of refined demand last year, with demand growth expected to recover slowly this year. Most users of refined copper in China, however, will hold off on spot purchases until March, despite brighter prospects for consumption, preferring to wait until factories re-open after Lunar New Year celebrations. "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. China's annual economic growth may have quickened to 7.8 percent in the fourth quarter a Reuters poll showed.

RIO TINTO CUTS ALUMINIUM, UPS BAUXITE IN 2012 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 per cent and 12 per cent respectively, driven by increased third party demand, it said in its production report. China was likely to account for the lion's share of this demand. Its alumina imports from Australia jumped by 164 percent on the year from January to November as it rushed to secure supply after Indonesia, previously a major supplier, changed export regulations for raw materials. Australia's two other major producers, BHP Billiton and Fortescue Metals Group, are also set to post strong quarterly performances when they report later this month. PRICES

Base metals prices at 0703 GMT

Metal Last Change Pct Move YTD pct chg LME Cu 7975.00 -25.00 -0.31 0.58 SHFE CU FUT APR3 57700 -820 -1.40 0.03 HG COPPER MAR3 362.40 -1.00 -0.28 -0.78 LME Alum 2045.00 -7.00 -0.34 -1.26 SHFE AL FUT APR3 15205 -120 -0.78 -0.91 LME Zinc 1983.00 -13.00 -0.65 -3.90 SHFE ZN FUT APR3 15175 -370 -2.38 -2.38 LME Nickel 17275.00 20.00 +0.12 0.70 LME Lead 2272.75 -22.25 -0.97 -2.87 SHFE PB FUT 15130.00 -140.00 -0.92 -0.79 LME Tin 24670.00 -80.00 -0.32 5.43 LME/Shanghai arb^ 408

Shanghai and COMEX contracts show most active months ($1 = 6.2192 Chinese yuan)

(Reporting by Melanie Burton; Editing by Muralikumar Anantharaman and Richard Pullin)