By Anna Stablum of Reuters LONDON - Copper tumbled five per cent to its lowest in almost three years, extending a near-five per cent overnight loss on dollar strength and worries about demand. "All the positions are being unwound with the slowdown and the economies contracting ... and China is slowing quickly," Ashok Shah, chief investment officer at London & Capital, said. "The stronger dollar is also having an influence as it reduces demand for metals from around the world," he said. The dollar soared to a two-year high against the euro Metals are priced in dollars, which makes them expensive for holders of other currencies when the dollar rises. London Metal Exchange copper for delivery in three months dropped to $US4,264.50 a tonne, its weakest since December 2005 and in Shanghai, copper plunged by its five per cent limit to 36,070 yuan ($US5,278) a tonne, a three-year low. By mid-session LME copper traded at $US4,280 a tonne. Prices of the metal, used in power and construction, have more than halved from a record high of $US8,940 a tonne in July. "Demand from China was a big driver and now the momentum in terms of demand is coming down very quickly," Shah said. Growth in the country - the world's biggest consumer of copper - is slowing, with data this week showing soft industrial production and a fall in GDP growth to nine per cent in the third quarter from above 10 per cent. BHP Billiton warned Chinese demand was set to weaken, although it showed little sign of trimming output. "China has not been immune to the global slowdown," the world's biggest mining house said. "We expect volatility and uncertainty to continue in the short term." London-listed BHP Billiton and Kazakhmys were among the 10 biggest losers on Britain's leading FTSE share index, down 7.8 and 10.2 per cent, respectively. China is the world's biggest buyer of copper and aluminium scrap, used to produce refined copper and aluminium alloy, and scrap merchants were defaulting on and delaying imports of contracted scrap, traders said. Copper stocks in LME warehouses rose 1,850 tonnes to 207,750 - about 90 per cent above the lows for this year seen in May and accounting for just over four days of global consumption. London & Capital's Shah said recent stability in money markets, partly achieved by government bailouts, must feed through to credit markets for metals prices to find a floor. "The next thing is to get the credit markets to function, once that happens I think we can get some stability coming into the metals markets," he said. Aluminium was at $US2,038 a tonne after hitting a three-year low of $US2,031, down 2.3 per cent from Tuesday's $US2,080. But prices were envisaged not to fall much further. "The production cuts announced and introduced will reduce supplies and thus support prices," a Commerzbank report said. Aluminum Corp of China Ltd said it aims to cut annual capacity by about 18 per cent. Stocks in LME warehouses rose 2,000 tonnes to 1,5 million tonnes - its highest since February 1995. "The surge in LME inventories is distorting the true picture and is the result of exceptional circumstances," Commerzbank said, referring to high counterparty risk making sellers turn to the LME while shunning bilateral contracts. "We expect a moderate price increase to an average of $US2,200 a tonne this quarter, and to $US2,450 on average in 2009." Lead fell 8 per cent to a low of $US1,260 a tonne -- the lowest since September 2006 -- before trading at $US1,266, down $US104 from Tuesday. Zinc shed $US14 to $US1,151/1,151.5 a tonne and earlier it touched $US1,118 -- the lowest since December 2004 and nickel traded down at $US10,560 from $US10,700/10,705. Tin lost 6.4 per cent to $US11,510, its weakest since January 2007, before being quoted at $US11,725/11,825, down $US575.

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