By Julie Crust LONDON, Nov 3 (Reuters) - Copper reversed earlier gains on Monday to fall as much as 3.5 percent after a sharp jump in inventories fanned pessimism about Chinese demand. Copper stocks on the London Metal Exchange grew 7,275 tonnes to 237,925, the highest level since March 2004. The increase followed gains of 6,775 and 6,575 at the end of last week. "This is three days of substantial additions," said John Meyer, analyst at investment bank Fairfax. "This is combined with further negative news out of China. A measure of Chinese manufacturing activity showed factory output shrank sharply in October in the face of waning orders, while officials pledged further steps to boost domestic demand to keep the economy from slowing too much. Three-month copper on the LME fell as low as $3,954 a tonne. At 1112 GMT it was trading at $4,025 per tonne, versus Friday's close of $4,099 per tonne, reversing from an earlier high of $4,270. Prices for the metal used in construction and power have fallen more than 50 percent since reaching a record high of $8,940 a tonne in July. Last month, LME copper fell nearly 36 percent, its biggest drop since at least 1970 and possibly in the exchange's 130-year history of copper trading. Nickel dropped 24 percent, its second biggest fall on record. "I don't see any dramatic turnaround this month in commodities. Manufacturing is slowing in China. Industry is slowing down and for the next couple of weeks at least there is no light at the end of the tunnel," said Peter McGuire of Commodity Warrants Australia. Base metal prices had started this month stronger buoyed by a weaker dollar and rising equity markets. The dollar softened against the euro as rising Asian and European equities helped to dampen extreme risk aversion. PRODUCERS REACT Aluminium rose as much as 2.6 percent before moving lower. It last traded at $2,045 from $2,045. Prices for the energy-intensive metal have dropped 40 percent since reaching a high of $3,380 a tonne in July. A number of mining companies have been forced to cut production, reduce capital expenditure and postpone new projects as metal prices have fallen close to or below marginal costs. United Company RUSAL said it has suspended production at the Zaporozhye Alumina and Aluminium Complex in Ukraine because current metal prices make the plant unprofitable. Nickel traded between $11,800 and $12,925 a tonne in a volatile session. It last traded at $12,000 a tonne from $12,100 at the close on Friday. Tin surged 5.2 percent to $14,100 a tonne before moving lower. It traded at $13,300 a tonne from $13,400 on Friday. Zinc was at $1,142 from $1,125 a tonne, while lead was trading at $1,494.75 from $1,505 at Friday's close. Metal Prices at 1118 GMT Metal Last Change Percent Move End 2007 Ytd Percent move LME Cu 4015.00 -84.00 -2.05 6670.00 -39.81 SHFE Cu* 32580.00 1180.00 +3.76 56880.00 -42.72 LME Alum 2041.00 -4.00 -0.20 2403.00 -15.06 SHFE Alu* 14105.00 200.00 +1.44 18180.00 -22.41 COMEX Cu** 187.75 3.35 +1.82 303.05 -38.05 LME Zinc 1135.00 10.00 +0.89 2370.00 -52.11 SHFE Zinc* 9445.00 350.00 +3.85 18950.00 -50.16 LME Nick 11925.00 -175.00 -1.45 26350.00 -54.74 LME Lead 1487.00 -18.00 -1.20 2550.00 -41.69 LME Tin 13200.00 -200.00 -1.49 16400.00 -19.51 ** 1st contract month for COMEX copper * 3rd contact month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07

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