MARKETS-METALS (UPDATE 3):METALS-Copper falls as dollar gains, inventories climb * Copper stocks rise to highest since mid-April * Investors eye U.S. PPI, NY Fed data * Dollar hits 6-week high against major currency basket (Recasts, changes dateline to LONDON from SHANGHAI) By Rebekah Curtis LONDON, Dec 15 (Reuters) - Copper fell on Tuesday, as the dollar hit a 2-1/2 month high against the euro and rising inventories underscored weak fundamentals. Copper for three-months delivery on the London Metal Exchange traded at $6,870.25 a tonne at 1046 GMT from a close of $6,913 on Monday. "The situation is tricky, we have weak fundamentals and a strong dollar," said Eugen Weinberg, commodities analyst at Commerzbank. The dollar hit a six-week high versus a currency basket, making dollar-priced commodities more expensive for holders of other currencies. Stocks of copper, used in power and construction, rose 3,650 tonnes to 470,800 tonnes. Stocks are at their highest since mid-April, having risen almost consistently since mid-July as Chinese buying has cooled. "They will keep increasing because demand is not keeping pace with supply," Weinberg said of inventories. Australia slashed its forecasts for copper production and exports for fiscal 2010, blaming disruptions at BHP Billiton ( BBL - news - people )'s giant Olympic Dam mine for what would be the nation's lowest output in a decade. Australia's Macquarie Bank predicts a global copper supply deficit is looming this year that will take two years to correct, increasing its 2010/11 copper price forecasts by 2-3 percent to $3.25-3.40/lb ($7,166-$7,500 a tonne). STELLAR 2009 Copper has more than doubled in value this year driven largely by hefty purchases from China, the world's top consumer of the metal. "Though much of the focus this year has been on China's soaring base metals imports...China has also been securing long-term access to the resources it needs to continue to drive its growth through strategically investing in foreign mining assets," Barclays ( BCS - news - people ) Capital said in a note. "As China's economic growth continues to power ahead, it faces a major challenge in keeping up with growing demand for raw materials, many of which it is not well endowed with." U.S. data due includes New York Fed Empire State the manufacturing survey and PPI data, both at 1330 GMT. The Federal Reserve's two-day meeting to set interest rates kicks off on Tuesday. Among other base metals, aluminium traded at $2,246 from $2,260. Stocks of the metal used in transport and packaging leapt 21,400 tonnes to around 4.6 million tonnes, within a whisker of this year's record high levels. The recovering prices and demand have encouraged aluminium smelters to restart idled capacity in recent months. Aluminum Corp of China Ltd ( ACH - news - people ), China's largest aluminium producer, said on Monday it had restarted all its idle aluminium and alumina capacity. The rapid recovery in smelting capacity is likely to pressure aluminium prices, analysts said. Cancelled warrants of aluminium -- material earmarked for delivery and not available to the market -- stood at 188,925 tonnes, equal to 4 percent of total LME stocks of the metal. Data the day before showed cancelled warrants rose to 193,525 tonnes, which Barclays Capital said was the highest since June 2008. Zinc was at $2,307 from $2,334 and lead was at $2,310 from $2,339.5. Tin traded at $15,322 from $15,300 and nickel was at $16,799 from $16,900. Metal Prices at 1045 GMT Metal Last Change Percent Move End 2008 Ytd Percent move COMEX Cu 312.00 -1.00 -0.32 139.50 123.66 LME Alum 2257.00 -3.00 -0.13 1535.00 47.04 LME Cu 6900.00 -13.00 -0.19 3060.00 125.49 LME Lead 2315.00 -24.50 -1.05 999.00 131.73 LME Nickel 16800.00 -100.00 -0.59 11700.00 43.59 LME Tin 15300.00 0.00 +0.00 10700.00 42.99 LME Zinc 2330.00 -4.00 -0.17 1208.00 92.88 SHFE Alu 16310.00 -115.00 -0.70 11540.00 41.33 SHFE Cu* 55020.00 30.00 +0.05 23840.00 130.79 SHFE Zin 18415.00 5.00 +0.03 10120.00 81.97 ** 1st contract month for COMEX copper * 3rd contract month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07 (Editing by Sue Thomas)

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