METALS-Copper rises near two-week high on China hopes

* Stock markets cautious, dollar index falls

* China refined copper output extends fall from record in Feb

* Miner Antofagasta boosts dividend payout as profits rise

(Recasts, updates prices, adds details) LONDON, March 12 (Reuters) - Copper rose to a near two-week high on Tuesday as hopes gathered pace that recent multi-month price falls could encourage physical buying from top consumer China. Traders in China, which consumes 40 percent of global refined copper, said a narrowing price gap between domestic Chinese prices and global benchmarks had spurred buying in recent days. The differential between Shanghai and London prices, taking into account import duties, has narrowed to 85 yuan ($13.67) from around 1,200 yuan in December. On the downside though, Jens Weidmann, head of Germany's central bank and a member of the European Central Bank's governing council, said the euro zone's "crisis is not over despite the recent calm on financial markets". Also a concern, British manufacturing output fell in January at the fastest pace since June, reinforcing fears that the economy has tipped into its third recession since the 2008 financial crisis. Three-month copper on the London Metal Exchange traded up at $7,834.50 a tonne from $7,755 on Monday, having earlier hit its highest since Feb 28 at $7,883. Copper prices dipped to $7,667 a tonne in intraday trade on Monday, their second lowest this year. Prices have shed almost 7 percent from the year's highs hit in early February to log losses of 2 percent for the year. "To sustain a macro-driven rally you need to see an actual improvement on the physical side, which we haven't seen yet ... we need to see premiums inching higher," said Andrey Kryuchenkov, an analyst at VTB Capital. Industry players in China, however, said looser monetary policy has yet to translate into commodities demand, in part due to uncertainties over the country's leadership transition and the spending power of local government. "We just need a little bit more patience. The downside is limited, but the upside could be slow and unspectacular," said Henry Liu, head of commodity research at Mirae Asset Securities in Hong Kong, who sees copper prices trading in the range of $8,300 to $8,500 in the second quarter.

CHINA COPPER OUTPUT DROPS The latest figures showing lower copper output by China will help ease worries that the world's largest consumer and producer will import less refined copper for much of this year. Chinese copper output dropped for a second straight month in February from record highs touched in December as smelter operations slowed for the Lunar New Year break. Aluminium output, a market in which China is also the top consumer and producer, rose 15 percent to 3.51 million tonnes in the first two months. January output reached a record 1.78 million tonnes, the data showed. In industry news, copper miner Antofagasta sought to brush off investor worries about its growth options with a better-than-expected 2012 payout and special dividend, as profits rose despite lower copper prices. In other metals traded, soldering metal tin traded up at $23,825 a tonne from a close of $23,700 a tonne on Monday, while zinc, used in galvanizing, was up at $1,991 a tonne from $1,960.50. Aluminium traded at $1,985 a tonne from $1,951.50 on Monday, while stainless-steel ingredient nickel traded at $17,042 a tonne from $16,875 on Monday. "The nickel price remains under pressure from severe over-supply as LME stocks continue to rise steadily," Macquarie said in a note. Latest figures showed nickel stocks on LME-registered warehouses fell by 144 tonnes to 161,316 tonnes, but remained close to three-year highs. Nickel had risen nearly 1 percent in the previous session after French metals group Eramet shut down a nickel mine in New Caledonia as a cyclone approached. The mine restarted early on Tuesday. Battery material lead traded up at $2,226.50 a tonne from Monday's close of $2,196. Metal Prices at 1532 GMT Comex copper in cents/lb, LME prices in $/T and SHFE prices in yuan/T

Metal Last Change Pct Move End 2009 Ytd Pct

move

COMEX Cu 354.45 3.75 +1.07 334.65 5.92 LME Alum 1981.00 29.50 +1.51 2230.00 -11.17 LME Cu 0.00 -7755.00 -100.00 7375.00 -100.00 LME Lead 2231.00 35.00 +1.59 2432.00 -8.26 LME Nickel 17035.00 160.00 +0.95 18525.00 -8.04 LME Tin 0.00 -23700.00 -100.00 16950.00 -100.00 LME Zinc 1995.00 34.50 +1.76 2560.00 -22.07 SHFE Alu 14750.00 -80.00 -0.54 17160.00 -14.04 SHFE Cu* 56370.00 -300.00 -0.53 59900.00 -5.89 SHFE Zin 15075.00 -80.00 -0.53 21195.00 -28.87 ** Benchmark month for COMEX copper * 3rd contract month for SHFE AL, CU and ZN

SHFE ZN began trading on 26/3/07

(Addition reporting by Harpreet Bhal in London and Melanie Burton in Singapore; editing by Alison Birrane and Keiron Henderson)