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METALS-Aluminium hits 4-1/2 yr low, copper off ahead of Asian holiday

* Aluminium touches weakest since July 2009

* Metals trade quietens ahead of Lunar New Year holiday

* Copper drifts to seven-week low

* Nickel drops, Macquarie expects bounce after Asian holiday

(Adds details, quotes on aluminium)

LONDON, Jan 29 (Reuters) - Aluminium touched its weakest levels in more than four years on Wednesday on persistent worries of overproduction while copper dropped for a sixth session ahead of the week-long Lunar New Year holiday in Asia.

Three-month aluminium on the London Metal Exchange touched a low of $1,735.25 a tonne, the weakest since July 2009.

The metal, burdened by global inventories estimated at 10-15 million tonnes, recovered slightly to close down 0.7 percent at $1,742 a tonne.

Aluminium premiums - which consumers have to pay on top of LME cash prices for immediate delivery - have shot to record highs in recent weeks, but this has stoked worries that this will allow some smelters to keep churning out metal.

"The high and in some cases still rising premiums in the key consumer regions and countries are preventing many producers from implementing urgently needed production cuts, for this provides aluminium manufacturers with indirect subsidies," Commerzbank said in a note.

The global aluminium market is expected to have a surplus of 568,400 tonnes this year, according to a consensus forecast of analysts polled by Reuters.

Three-month copper closed down 0.2 percent at $7,127 a tonne, its weakest since Dec. 10.

China is the world's biggest consumer of copper, and trading volumes in industrial metals are typically thin before the annual Lunar New Year holiday, which starts on Friday.

"We've seen a decent amount of book-squaring ahead of it. We've also seen long liquidations and some profit-taking on copper and nickel," Barclays analyst Gayle Berry said.

Copper has shed 4.5 percent since touching a peak of $7,460 on Jan. 2 as other financial assets including equities have hit multi-month lows on a sell-off in emerging markets.

South Africa on Wednesday joined Turkey in raising rates designed to staunch and reverse a major flight from risk. The move had boosted hopes that a vicious cycle of selling in emerging markets may have been short-circuited.

But the cracks were beginning to reappear in European markets on expectations the Federal Reserve will announce later in the day that it will press on with stimulus cuts.

Its scaling back has been a major factor in the recent emerging market sell-off, because the programme has created liquidity that has flowed into emerging markets and commodities.

"I think it's weighed on sentiment (in the base metals market), and maybe that's what triggered the long liquidation," Berry said. "For people who were positioned on the long side, maybe it made them a little bit nervous."

The Fed will issue a statement at the conclusion of a two-day policy meeting later on Wednesday.

NICKEL SEEN BOUNCING

Copper prices have also been dampened by expectations of rising supply into the year-end as mining groups release production results showing strong output.

Anglo American, the fifth-largest diversified mining group, said on Wednesday it had achieved a quarterly output record in copper, up 24 percent to 214,400 tonnes.

Nickel was the biggest loser on the LME, giving up 1.1 percent to close at $13,985 a tonne, but analyst Colin Hamilton at Macquarie expects prices to bounce towards $16,000 due to expected higher costs of stockpiled ore in China.

"For those without agreed offtake from these stocks, they could well find that the ore price ex-port is rising substantially post Chinese New Year," Hamilton told the Reuters Global Base Metals Forum.

"We think a rise of 50 percent plus (for ore) is possible."

Zinc shed 0.6 percent to $1,993, lead fell 0.5 percent to close at $2,142.50 and tin bucked the trend and added 0.3 percent to finish at $22,175.

PRICES

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

(Additional reporting by Melanie Burton; editing by Jason Neely)