METALS-Copper slips, optimism for Chinese demand supports

* LME/ShFE arb: http://bit.ly/2wZSAEz

* Funds' net long copper position on LME highest since mid-Sept (Recasts, adds comment, changes dateline from Melbourne)

LONDON, Oct 18 (Reuters) - Copper prices slipped on Wednesday due to profit-taking after the recent rally to three-year highs but expectations of solid demand growth in top consumer China helped support sentiment and limit losses.

The market is looking for announcements from China's twice-a-decade Communist Party Congress, which started on Wednesday, to boost manufacturing and construction activity and fuel demand for industrial metals.

"People are expecting major social building initiatives and all sorts of explosive announcements," said Marex Spectron's global head of analytics, Guy Wolf.

"The scope for disappointment is relatively high. It would be reasonable to expect a correction in the short term, but the big picture is a long term bull market ... There is some evidence of investment money coming back into commodities."

Benchmark copper on the London Metal Exchange was down 0.1 percent at $7,019 a tonne at 0932 GMT. Prices hit $7,177 on Monday, their highest level since July 2014.

CHINA CONGRESS: Chinese President Xi Jinping opened the Congress with a pledge to build a "modern socialist country" for a "new era" that will be proudly Chinese, steadfastly ruled by the party but open to the world.

DEFICITS: The market is expecting a copper market deficit this year. That was reinforced by the International Copper Study Group (ICSG), which last month said the market saw a 75,000-tonne deficit in the first half of the year.

OVERDONE: "While global demand is solid, we only see a limited risk of undersupply with mine production recovering from disruptions earlier this year," Julius Baer analyst Carsten Menke said. "We believe the rally is overdone."

SPECULATORS: Funds' net long copper positions on the LME at 61,302 lots, or more than 1.5 million tonnes, has risen about 13 percent since Oct. 2 and is at its highest level since the middle of September. <LME-CA-MNET>

ALUMINIUM: Prices were down 1.1 percent at $2,116 a tonne. Downward pressure comes from perceptions that the cuts in top producer China may be less severe than previously expected.

CHINA ALUMINIUM: The Chinese government's campaign to reduce air pollution and whittle down excess production is seen reducing aluminium smelting capacity by about a 10th by the end of 2017. Cuts at major producer China Hongqiao Group are likely to be far less than the previously mooted 30 percent.

ELSEWHERE: The price of zinc rose 0.1 percent to $3,087, lead slipped 0.8 percent to $2,471, tin eased 0.7 percent to $20,200 and nickel gained 0.3 percent to $11,800 a tonne.

(Reporting by Pratima Desai; Editing by Greg Mahlich)