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METALS-Copper, aluminum strike new 3-year highs

MELBOURNE, Aug 17 (Reuters) - A broad-based rally in metals extended on Thursday to new multi-year peaks for London aluminum, copper and zinc, on expectations that China's reform of its metals industry will curb supply against a background of robust demand.

FUNDAMENTALS

* LME COPPER: London Metal Exchange copper struck its highest since November 2014 at $6,580 a tonne, before paring gains to $6,548 a tonne, still up 0.2 percent and holding the prior session's 2.4 percent rally. Copper prices are up 18 pct this year.

* LME: LME aluminum hit its highest since late 2014, while zinc hit a new peak since 2007 at $3,145 a tonne. Both LME zinc and LME lead held the prior day's 5 pct gains and all three are up between 21-25 percent this year.

* SHFE: In Shanghai, metals held onto their overnight rallies. Shfe zinc hit limit up of 6 percent, Shfe lead rallied 4.5 percent while Shfe aluminum and nickel were both 3 percent higher and Shfe copper rose 2 percent.

* U.S. ECONOMY: U.S. homebuilding unexpectedly fell in July as the construction of multi-family houses tumbled to a 10-month low, but strong job growth is expected to continue to support the housing market recovery.

* USD: Prospects for a slower pace of interest rate rises in the United States undermined the dollar and offered an extra lift to metals.

* U.S. INTEREST RATES: Federal Reserve policymakers appeared increasingly wary about recent weak inflation and some called for halting interest rate hikes until it was clear the trend was transitory, according to the minutes of the U.S. central bank's last policy meeting.

* ZINC: Chinese traders are diverting money from steel to zinc on the Shanghai Futures Exchange after a hike in trading fees on Monday cut the appeal of steel itself even as booming construction activity fuels demand for steel-making essentials like zinc.

* CAPACITY CUTS: China's top steel-making province has pledged to fulfill capacity cutting targets for this year in steel, cement, coal and glass by the end of September, under efforts to tackle air pollution ahead of winter, an environment official said on Wednesday.

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MARKETS NEWS

* Asian stocks edged up on Thursday as tensions between the United States and North Korea came off the boil, while worries about President Donald Trump's ability to implement his pro-growth agenda and the Federal Reserve's concerns about low U.S. inflation hit the dollar.

DATA AHEAD (GMT) 0600 Germany Wholesale price index Jul 0830 Britain Retail sales Jul 0900 Euro zone Eurostat trade Jun 0900 Euro zone Inflation final Jul 1230 U.S. Weekly jobless claims 1230 U.S. Philly Fed business index Aug 1315 U.S. Industrial production Jul 1400 U.S. Leading index Jul PRICES

BASE METALS PRICES 0221 GMT Three month LME copper 6547 Most active ShFE copper 51320 Three month LME aluminum 2100 Most active ShFE aluminum 16540 Three month LME zinc 3131 Most active ShFE zinc 25975 Three month LME lead 2515 Most active ShFE lead 20260 Three month LME nickel 10770 Most active ShFE nickel 87830 Three month LME tin 20195 Most active ShFE tin 144840

BASE METALS ARBITRAGE

LME/SHFE COPPER LMESHFCUc3 427.24 LME/SHFE ALUMINIUM LMESHFALc3 267.09 LME/SHFE ZINC LMESHFZNc3 1040.59 LME/SHFE LEAD LMESHFPBc3 -47.09 LME/SHFE NICKEL LMESHFNIc3 2123.53

(Reporting by Melanie Burton; Editing by Biju Dwarakanath)