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METALS-Shanghai copper prices fall sharply on China demand jitters

(Adds analyst comment, updates prices) BEIJING, Dec 6 (Reuters) - Shanghai copper fell more than 3 percent on Wednesday, tracking a steep drop on the LME as investors wound in profits on concerns China could see a weaker first half of next year. Analysts said besides a rise in copper inventories, the selloff was fueled by concerns about liquidity tightness in China towards the year-end, amid a government-led deleveraging push, and slowing investment in the country's power sector, a key driver for copper. The "sluggish investment in power indicates copper demand in China may remain weak for a while," Helen Lau, an analyst at Argonaut Securities, wrote in a note, adding that she expected to see "more downward pressure" on the metal over the short term.

FUNDAMENTALS

* SHFE COPPER: The most-traded Shanghai Futures Exchange copper contract fell 3.8 percent in morning trade before trimming the losses to trade down 3.1 percent at 51,420 yuan ($7,774.18) a tonne by the mid-session interval, and still on course for its biggest one-day drop since November 2016.

* TECHNICALS: The ShFE copper contract's slump took it below the 200-day moving average (DMA), a technical indicator, sending a bearish signal to markets.

* LME COPPER: Three-month copper on the London Metal Exchange was trading up 0.3 percent at $6,561 a tonne by 0441 GMT, having plummeted 4.2 percent on Tuesday as inventories rose by over 10,000 tonnes. Prices saw the steepest daily drop since July 2015 in the previous session.

* SUPPORT: LME copper may test support at $6,492 a tonne, a break below which could cause a loss to the next support at $6,451, according to Reuters analyst Wang Tao.

* PUTS: Traders pointed to a large 3,500 strike at $6,500 in December copper put options, which could drag on prices. <0#MCUZ7+>

* SELLING: Traders noted consistent buying but one said it was not sufficient to stop copper's selling momentum which was in line with profit taking typically seen at year end. They are also wary that further weakness could spark margin calls by a large Shfe copper long.

* NICKEL: Shanghai nickel was down 4 percent, tracking a 4.6-percent fall on the LME in the previous session to the metal's lowest level in nearly two months, as prices cracked below the 100-DMA, sparking more chart weakness.

* ZINC: ShFE zinc was down 2.6 percent at 24,750 yuan a tonne.

* ALUMINIUM: ShFE aluminum was down 2.1 percent in Shanghai, hurtling closer to support at 14,000 yuan a tonne, and has now lost over 17 percent since Sept. 20 as winter production cuts in China turned out to be less severe than expected.

METALS NEWS

* COPPER: Indonesia said on Tuesday it planned to acquire Rio Tinto's, stake in the Grasberg copper mine operated by Freeport-McMoRan Inc, potentially solving a drawn-out problem for all three parties.

* BATTERIES: Glencore has increased production of metals used to make electric car batteries faster than its major mining rivals, according to an industry-wide analysis.

PRICES

BASE METALS PRICES 0441 GMT Three month LME copper 6561 Most active ShFE copper 51420 Three month LME aluminum 2049 Most active ShFE aluminum 14290 Three month LME zinc 3093 Most active ShFE zinc 24745 Three month LME lead 2470.5 Most active ShFE lead 18670 Three month LME nickel 10875 Most active ShFE nickel 87930 Three month LME tin 19435 Most active ShFE tin 140030

BASE METALS ARBITRAGE

LME/SHFE COPPER LMESHFCUc3 772.66 LME/SHFE ALUMINIUM LMESHFALc3 -1381.32 LME/SHFE ZINC LMESHFZNc3 318.5 LME/SHFE LEAD LMESHFPBc3 -1007.38 LME/SHFE NICKEL LMESHFNIc3 2382.47

($1 = 6.6142 Chinese yuan)

(Reporting by Tom Daly; Editing by Joseph Radford and Amrutha Gayathri)