METALS-Copper gains as demand improves, aluminium volatile

* Aluminium volatile after UK court ruling on LME warehousing

* Chinese domestic copper stockpiles tighten on demand pick-up

* Nickel falls again, but still up 13 pct on year

(Recasts, adds details, closing prices)

LONDON, March 27 (Reuters) - Copper prices bounced on Thursday on improved demand in Europe and top consumer China, but a stronger dollar and continued worries about credit in China capped gains.

Aluminium was volatile after a British court ruling halted a warehousing reform of the London Metal Exchange (LME), falling initially in response to the news and then reversing losses.

LME three-month copper was last bid up 0.77 percent at $6,560 a tonne, after prices slipped 1.4 percent on Wednesday. Prices hit a two-week top of $6,623.75 on Tuesday, off this month's 3-1/2 year low of $6,321.

"Clearly we've seen plenty of reports about increased consumer buying in Europe and there's been signs of increased Chinese consumer buying as well and a pick-up in orders," said Wiktor Bielski, head of commodities research at VTB Capital.

In China, there were signs of a pick-up in seasonal demand as warmer weather led to more manufacturing and construction. "Demand has definitely picked up in late March compared to early March on a seasonal basis, and will improve further in April," analyst Chunlan Li at CRU in Beijing said.

But more convincing fundamental signals are required for a sustained recovery in prices, she said, adding that official Chinese manufacturing figures next week could reflect slowing growth and trigger a further drop in prices.

China is the world's biggest copper consumer, accounting for around 40 percent of global demand. Its consumption typically peaks in the second quarter and rising orders have already begun to tighten domestic stockpiles of the metal.

Capping gains in copper, the dollar edged up versus the euro after upbeat U.S. growth and jobless claims data increased expectations that U.S. interest rates might rise sooner than previously thought.

A strong dollar makes dollar-priced metals costly for non-U.S. investors.

Copper may also struggle technically after plunging to a 3-1/2-year low on March 19, some analysts said.

"I think the (down) move in copper was entirely technical, copper broke (key) support and there was a flood of selling from the high-frequency funds," Bielski said. "A recovery will depend on the same factors in the other direction."

Indonesia's government has reached a deal over export taxes with U.S. mining giant Freeport-McMoRan Copper & Gold Inc FCX.N, which should resume copper shipments next month.


Aluminium prices recovered after initially falling on news that a UK court ruling had dealt a blow to a key LME reform aimed at cutting logjams at metals warehouses.

LME aluminium ended up 0.52 percent to $1,738 a tonne.

"We would not be surprised to see LME warehouse inventories at warehouse locations impacted by queues to increase before and even after the April 1st date while the LME sorts itself out," said Standard Bank in response to the news.

Also in aluminium, an Indonesian ban on unprocessed ore, which has driven nickel prices higher this year, could be important in driving up aluminium next year, said Marco Georgiou at CRU.

Nickel has been the best-performing base metal this year, rising 13 percent, but declined for the second session as some investors thought the gains were exaggerated. LME nickel shed 1.23 percent to end at $15,705 a tonne.

There were valid fundamental reasons behind this year's rally, Bielski said.

"That ban has really begun to hit quite hard on nickel ore. From my sources in China, port stockpiles of nickel ore are down 4 million tonnes since the ban was put into place, which is 15-20 percent," he said. "Every week that you have no exports out of Indonesia, these stocks are falling between half a million and a million tonnes."

Lead ended up 0.05 percent at $2,067 a tonne, zinc ended up 0.10 percent at $1,972 a tonne while tin ended down 0.74 percent at $22,800 a tonne.


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 = 6.2094 Chinese yuan)

(Additional reporting by Melanie Burton and Maytaal Angel; Editing by William Hardy)