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METALS-Copper holds near two-year high, China and dollar support

* LME/ShFE arb: http://tmsnrt.rs/2oQ5nm2

* Copper rally spurred by news China may ban scrap imports

* Tin supported by reports of China smelter shutdowns (Recasts, adds comment, changes dateline from MELBOURNE)

LONDON, Aug 1 (Reuters) - Copper prices held near two-year highs on Tuesday, supported by expectations of stronger demand from top consumer China, where a government-led infrastructure push has led to robust activity in the construction sector.

Benchmark copper on the London Metal Exchange was down 0.4 percent at $6,341 a tonne. The metal widely used in power and construction hit $6,430 on Monday, its highest since May 2015.

"China data shows things humming along in manufacturing and construction. That's the positive," a copper trader said. "The weak dollar also makes things easier for base metals, though there is some profit-taking going on."

CHINA DATA: The official manufacturing purchasing managers' index held above the 50 mark that separates growth from contraction for the 12th straight month, as China poured funds into a construction boom that has fueled demand for cement, steel and other building materials.

DOLLAR: The dollar index near 14-month lows makes industrial metals denominated in the U.S. currency cheaper for non-U.S. firms, which could boost demand.

SCRAP: News that China may ban imports of some scrap metal started copper's rally from below $6,000 last week. The ban is set to come into effect from the end of 2018. China is the world's largest importer of scrap.

"The market was primed for the upside and scrap happened to be a reasonable cover story," said Macquarie analyst Vivienne Lloyd. "But medium- to long-term it doesn't change the balance at all."

SHIFT: "Most of the preparation of this scrap type is likely to simply shift offshore from south China to other developing Asia, and we note the Philippines, Thailand and Malaysia have recently seen increases to both volumes of scrap flow to China and implied copper content (by value)," Lloyd said.

TIN: Three-month tin was down 0.4 percent at $20,565, but close to the $20,905 a tonne hit last week, its highest since the middle of January on worries about supplies from top producer China.

ENVIRONMENT: Media reports said smelters in China's largest tin-producing province had been shut due to environmental concerns. China has ramped up its war on pollution and industrial overcapacity this year.

NICKEL: LME nickel slipped 0.4 percent to $10,155 a tonne, but was bolstered by supply concerns and expectations of stronger demand from Chinese stainless steel mills.

PHILIPPINES: The Philippines' environment minister Roy Cimatu said he would not lift a ban on open-pit mining imposed in April in an anti-pollution crackdown. The Philippines is the world's top nickel ore supplier.

PRICES: Aluminium fell 0.5 percent to $1,909, lead ceded 1.1 percent to $2,307 and zinc lost 0.6 percent to $2,777 a tonne.

(Editing by Dale Hudson)