* China copper smelters seek 50 pct premium rise - traders
* ShFE aluminium sinks to 2-month low of 14,070 yuan/tonne
* Coming up: U.S. housing starts, building permits, 1330 GMT
(Adds details, quotes; previous SINGAPORE)
LONDON, Nov 26 (Reuters) - Aluminium edged up on Tuesday after touching four-and-a-half-month lows in the previous session, but analysts expected more losses as an overhang of inventories weighed on the market and speculators added short positions.
Copper was barely changed, supported by a weaker dollar and a shortfall in physical metal.
Relative value trades have been popular this year, including shorting aluminium and going long on copper, said analyst Robin Bhar at Societe Generale in London.
"From a tactical point of view, certainly for the year-end, going long copper and shorting aluminium is paying dividends. It's definitely a trade that is working," he said.
In the past week up to Monday, copper had gained about 2 percent while aluminium had shed around 1 percent.
"That could be a reason why we are seeing copper and aluminium going their own ways. Some of those trades are being put on because copper hasn't gone into surplus yet on a tangible basis and aluminium is still plagued by oversupply."
LME aluminium prices edged up 0.4 percent to $1,782 a tonne by 1030 GMT, having dropped as low as $1,768 a tonne on Monday, the lowest since July 5.
Aluminium open interest on the LME rose by 8,082 lots on Monday <MAL-OI-TOT>, which, combined with lower prices, implied that fresh short positions were added.
In Shanghai, the most active February aluminium contract fell to 14,070 yuan ($2,300) a tonne, a two-month low.
"Aluminium, of all the base metals, is facing some of the bigger headwinds given all the supplies tied up in warehouses, and the new proposed changes in LME rules," said James Glenn, economist at National Australia Bank in Melbourne.
"It's probably the majority view that you're going to get an increase in physical supply. At the moment that is driving prices lower," he added.
LME stocks of aluminium are within reach of record highs, at 5.4 million tonnes, with similar volumes thought to be held outside exchange inventories, built up in the wake of the 2008 credit crisis. <MALSTX-TOTAL>
But the aluminium has not been freely available to market due to investor demand and because of huge bottlenecks that have delayed delivery by a year or more in some locations.
The LME, the world's biggest industrial metals marketplace, announced a tougher warehouse policy earlier in November to cut queues for delivery to a maximum of 50 days from over a year in some cases, after persistent complaints and a string of lawsuits from metal buyers.
COPPER REMAINS TIGHT
LME copper was unchanged at $7,099 a tonne. On Monday it hit the highest since Nov. 12 at $7,140, rebounding from three-month lows of $6,910 seen last week. ShFE copper closed up 0.18 percent on Tuesday at 50,790 yuan a tonne.
Nearby supplies of refined copper remain tight in Asia after delayed shipments from a typhoon-hit smelter in the Philippines, although they eased a little on Monday. Cash copper traded at a $1.50 discount to the benchmark contract, from a premium of $4 last week. <CMCU0-3>
Chinese copper smelters are seeking a rise of more than 50 percent in yearly premiums for exports of refined copper in 2014 after Codelco last week asked for a 41 percent increase in premiums for shipments to China, trading sources said.
The metal complex received support from a weaker dollar, which was hurt by lower U.S. yields. A softer dollar makes metals priced in the U.S. currency cheaper for buyers outside the United States.
Markets are expected to quieten ahead of the U.S. Thanksgiving holiday on Thursday.
Three month LME copper
Most active ShFE copper
Three month LME aluminium
Most active ShFE aluminium
Three month LME zinc
Most active ShFE zinc
Three month LME lead
Most active ShFE lead
Three month LME nickel
Three month LME tin ($1 = 6.0926 Chinese yuan)
(Additional reporting by Melanie Burton; Editing by Dale Hudson)