By Anna Stablum LONDON, Nov 12 (Reuters) - Copper and aluminium touched three-year lows on Wednesday as inventories rose and investors fretted about sluggish demand and decelerating economic growth. "Demand is pretty awful," said analyst Daniel Smith at Standard Chartered. "There is more bad news to come so November and December will be pretty soft." Copper for three-month delivery MCU3 on the London Metal Exchange fell to a more than three-year low of $3,570 per tonne, before trading at $3,599 by 1026 GMT. On Tuesday, the metal -- often seen as a key gauge of real economic activity -- closed at $3,640. "The main floor for most of these markets is around the average cost of production so we haven't really come to that point yet in terms of copper," Smith said. "We could see another couple of hundred dollars of downside for copper," he added. In the previous session, the World Bank slashed its 2009 growth forecast for developing countries, adding to the tide of negative news, sending copper tumbling 6 percent, despite an 8 percent rise in Chinese copper imports in October. For a graphic of Chinese copper imports, please click: here Stocks of copper in LME-registered warehouses rose another 4,625 tonnes to 270,100 tonnes, their highest since March 2004. In November alone, they are up more than 32,200 tonnes. The contango -- with nearby contracts trading at a discount to those further forward -- widened to $38, the highest level since Jan. 7, as the market is seen well supplied. Codelco, the world's largest copper producer, will cut its copper premiums for South Korea and Japan by up to 36 percent in 2009 as demand weakens, industry sources said, in line with cuts for European buyers. [ID:nSEO356402] "The fall in premiums seems appropriate considering the current market environment," said investment bank Fairfax. "We remain relatively optimistic for the longer-term prospects for copper due to a rapid supply side response," Fairfax said in a daily research note. Codelco produces about 11 percent of the world's copper, used widely in construction, and as a result, its premium for refined copper is typically taken as the industry benchmark. LME aluminium MAL3 fell to a three-year low of $1,919 per tonne before trading at $1,927, down $21 from Tuesday. The light metal is under pressure from soaring inventories and immune to the latest round of cutbacks, most recently Vimetco (VICOq.L: Quote, Profile, Research, Stock Buzz), which said it will trim output by a further 15,000 tonnes in 2008 in response to falling demand. [ID:nLC586759] LME aluminium inventories stand at 1.56 million tonnes, enough for 15 days of global consumption and the highest on record for the contract. Near term doom and gloom would push prices lower but with more production cutbacks the market would face tight supplies when demand turned higher again sometime next year, Smith said. "Early next year there will be opportunities to enter some markets with a six month view ... we think copper will come back, aluminium and zinc will also probably rally in the second half of next year," he said. Three-months zinc MZN3 traded higher at $1,116 a tonne from Tuesday's $1,110, while lead MPB3 was down $7 at $1,263. Tin MSN3 dropped to $13,550 a tonne from $14,150 and nickel MNI3 fell $100 to $10,600. METAL PRICES BY 1027 GMT Metal Last Change Pct Move End 2007 Ytd Pct move LME Cu 3599.00 -41.00 -1.13 6670.00 -46.04 SHFE Cu* 29240.00 -80.00 -0.27 56880.00 -48.59 LME Alum 1922.00 -26.00 -1.33 2403.00 -20.02 SHFE Alu* 13760.00 50.00 +0.36 18180.00 -24.31 COMEX Cu** 164.25 0.00 +0.00 303.05 -45.80 LME Zinc 1111.00 1.00 +0.09 2370.00 -53.12 SHFE Zinc* 9470.00 160.00 +1.72 18950.00 -50.03 LME Nick 10600.00 -125.00 -1.17 26350.00 -59.77 LME Lead 1262.00 -8.00 -0.63 2550.00 -50.51 LME Tin 13550.00 -600.00 -4.24 16400.00 -17.38 ** 1st contract month for COMEX copper * 3rd contact month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07 (Additional reporting by Nick Trevethan in Singapore, editing by Karen Foster)

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