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METALS--Fresh buying lifts China copper as U.S. dollar weakens, inventories drop

drop@ (Updates prices, adds details)

SYDNEY, Oct 24 (Reuters) - A wave of fresh investment drove Chinese copper futures more than 2 percent higher on Tuesday.

Traders said the weaker U.S. dollar prompted investors to buy into copper contracts on the London Metal Exchange (LME). The lower greenback makes dollar-denominated LME contracts less expensive for holders of other currencies.

The positive sentiment swept through other base metals contracts in China, helped by fresh signs this week of declining domestic production as winter approaches.

Data on Monday showed zinc production fell 2.7 percent last month to 537,000 tonnes after numbers last week showed aluminium output dropped 5.6 percent to 2.6 million tonnes, its lowest since April 2016.

LME COPPER: Three-month copper on the London Metal Exchange was steady at $7,098.50 a tonne by 0700 GMT, maintaining gains from the previous session.

Copper prices breached $7,000 a tonne last week for the first time in more than three years as inventories of metal continue to fall, according to ANZ bank.

LME copper stockpiles are down 10 percent over the past four weeks, with more than 13,000 tonnes of copper warrants cancelled - a sign of further deliveries out of warehouses in coming days, ANZ said.

* SHFE COPPER: The most-traded copper contract on the Shanghai Futures Exchange gained just over 2 percent before backtracking to close 1.5 percent firmer at 55,480 yuan ($8,362.22) a tonne.

* DOLLAR DOWN: The dollar edged down on Tuesday, stepping back from recent highs as market attention turns to who will be the next head of the U.S. central bank.

* CHINA REFINED COPPER OUTPUT: Data released on Monday showed China's refined copper output was the highest since December 2014.

* ALUMINIUM CONSUMPTION: China's biggest state-run aluminium producer said consumption of the metal is set to increase by 9-10 percent this year on the back of strong downstream demand, and keep growing at a faster rate than the country's gross domestic product (GDP) in 2018.

* ALUMINIUM PRICES: Benchmark ShFE aluminium and three-month LME contracts settled modestly higher.

* ZINC: Three-month zinc retreated by 0.2 percent to $3,158.50 a tonne. Prices rose on Monday on data showing output in China slipped in September, highlighting worries that winter production cuts are tightening supplies of the metal. ShFE zinc closed up 1.5 percent, in tandem with firmer Chinese steel futures, which are up for a third consecutive day.

* NICKEL UP: LME nickel gained 1 percent to $11,990 a tonne, while ShFE nickel ended up 1.15 percent, also helped by rising steel prices.

PRICES

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

Most active ShFE nickel

Three month LME tin

Most active ShFE tin

ARBS ($1 = 6.6346 Chinese yuan)

(Reporting by James Regan; Editing by Christian Schmollinger and Sunil Nair)