* China embarking on its fourth round of environmental inspections
* LME/ShFE arb: http://tmsnrt.rs/2oQ5nm20
* U.S., North Korea tensions weigh on dollar (Recasts, adds comment and official prices)
LONDON, Aug 9 (Reuters) - Aluminum prices climbed to their highest in more than two years on Wednesday as expectations of capacity cuts in top producer China, where the government is waging a war on pollution, were reinforced by a lower dollar.
Benchmark aluminum on the London Metal Exchange traded down 0.3 percent, on profit-taking, at $2,024 a tonne in official rings. Earlier it touched $2,043, its highest since November 2014, a gain of around 20 percent this year.
"Aluminum's rise is related to capacity cuts and tighter environmental regulations. Shandong province yesterday announced capacity cuts that were larger than expected," said Xiao Fu, head of commodity strategy at Bank of China International.
"It's related to supply side reform and there is a broad-based spillover into other metals. We are seeing long positions being added in copper and overall market."
SHANDONG: China's Shandong province has ordered 3.21 million tonnes of smelting capacity to be shut. In a statement the Shandong Development and Reform Commission (SDRC) said checks had shown areas of the eastern province had 3.21 million tonnes of illegal capacity built without permits.
ENVIRONMENT: The shutdowns come as China's Ministry of Environmental Protection (MEP) said it was embarking on its fourth round of environmental inspections across eight provinces and regions, including Shandong.
CHINA ALUMINIUM: China's aluminum output hit a record high of 97,700 tonnes a day in June. That was equivalent to an annualized run rate of 35.7 million tonnes and represented 56.5 percent of global output, also a fresh high.
DOLLAR: Industrial metals overall were boosted by a lower U.S. currency, which makes dollar-denominated commodities cheaper for non-U.S. firms; a relationship used by funds which trade using buy and sell signals generated by numerical models.
NORTH KOREA: The dollar came under pressure after North Korea said it is examining plans for a missile strike on the U.S. Pacific territory of Guam, just hours after U.S. President Donald Trump told the North that any threat to the United States would be met with "fire and fury."
COPPER: Copper was untraded in official rings, but bid up 0.2 percent at $6,493 a tonne from an earlier $6,515, its highest since December 2014. Expectations of stronger demand from top consumer China have seen copper rise around 17 percent this year.
SICHUAN: Research firm Antaike said lead and zinc mines and smelters in Sichuan had not been affected by Tuesday's earthquake. But it did say the start of environmental inspections in the province had prompted 60 percent of local lead-zinc mines to shut down for month-long maintenance. That could mean lower supplies of zinc and lead in August and Sept.
PRICES: Zinc was up 1.2 percent at $2,961, lead gained 0.3 percent to $2,390, tin rose 0.6 percent to $20,325 and nickel added 1.1 percent to $10,750 a tonne.
(Additional reporting by Tom Daly in Beijing; Editing by David Evans and Adrian Croft)