MARKETS-METALS (UPDATE 4) * Supply side will be important in 6-12 mths time * Aluminium stocks hit record high above 4.637 million T * Nickel stocks within sight of Nov 1994 record (Adds comment, updates prices) By Pratima Desai LONDON, Dec 17 (Reuters) - Copper prices faltered on Thursday as the dollar hit three-month highs against a currency basket, but analysts say a healthier global demand outlook is expected to fortify sentiment and prices. Benchmark copper on the London Metal Exchange was trading at $6,950 a tonne at 1154 GMT from $7,039 at the close on Wednesday when the metal used in power and construction touched $7,067, the highest since Dec. 8. The dollar surged to a three-month high against a currency basket after the Federal Reserve voiced growing optimism about the health of the U.S. economy, while the euro tumbled on worry about Greece's fiscal health. However, the damage from the dollar has partly been offset by improving economic data from the United States, the world's largest economy, highlighted in a statement from the Fed on Wednesday, and expectations of higher demand. "Commodities are going to stay strong over the next three to four months because demand globally is recovering," said Max Layton, analyst at Macquarie. "But on a six to 12 month view the supply side will be more important." A higher U.S. currency makes dollar-denominated metals more expensive for holders of other currencies. Even though some analysts think the dollar will rise further, fundamentals are expected to play a bigger role in coming months. "Investors are not ready to give up on industrial metals and sentiment remains very bullish as we approach 2010," VTB Capital said in a note. IGNORING INVENTORIES That is especially true for copper, which so far this year has gained about 125 percent. "Copper is in a strong position ... It has managed to hold around the $7,000 psychological level," said Daniel Briesemann, analyst at Commerzbank. Holding copper back though are inventories in LME warehouses, at 474,575 tonnes -- a gain of about 85 percent since the middle of July and the highest since April. "People are ignoring copper stocks, just as they are ignoring aluminium stocks," a metals trader said. Aluminium stocks hit a record high above 4.637 million tonnes, nearly double the levels seen at the start of 2009. However, prices of the metal used widely in transport and packaging are up about 45 percent this year because about 70 percent of LME stocks are tied up in financing deals until May and so are not available to the market. Also a plus are cancelled warrants -- material already earmarked for delivery -- at around 200,000 tonnes. "Though it's not available there's a massive stock overhang, a capacity overhang and the outlook is for a large aluminium market surplus over the next few years," Layton said. Layton expects a recovery in stainless steel demand to push up nickel prices over the next six months. Others disagree, citing nickel stocks at 147,690 tonnes, the highest since January 1995 and within sight of the record high of 151,254 tonnes seen in November 1994. Nickel was at $17,210 a tonne from $17,500 at the close on Wednesday, aluminium at $2,254 from $2,276 and zinc at $2,406 from $2,434. Battery material lead was at $2,378 a tonne from $2,410 and tin at $15,700 from $15,500. For a story on a possible bid by Deutsche Bank for RBS Sempra to expand its commodities involvement, click on Metal Prices at 1156 GMT Metal Last Change Percent Move End 2008 Ytd Percent move COMEX Cu 319.60 7.50 +2.40 139.50 129.10 LME Alum 2260.00 27.00 +1.21 1535.00 47.23 LME Cu 7020.00 125.00 +1.81 3060.00 129.41 LME Lead 2400.00 40.00 +1.69 999.00 140.24 LME Nickel 17350.00 450.00 +2.66 11700.00 48.29 LME Tin 15350.00 25.00 +0.16 10700.00 43.46 LME Zinc 2435.00 100.00 +4.28 1208.00 101.57 SHFE Alu 16445.00 -15.00 -0.09 11540.00 42.50 SHFE Cu* 55320.00 210.00 +0.38 23840.00 132.05 SHFE Zin 18700.00 95.00 +0.51 10120.00 84.78 ** 1st contract month for COMEX copper * 3rd contract month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07

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