* Copper recovers as dollar slips against euro * Copper gains after hitting 3-year low on demand worry * China's October copper and nickel output plunges (Updates prices, recasts lead, adds comment) By Julie Crust and Michael Taylor LONDON, Nov 13 (Reuters) - Copper recovered from an earlier three-year low on Thursday, as a weaker dollar and Chinese production cuts offset demand concerns after data showed China's industrial output fell in October. Three-month copper MCU3 on the London Metal Exchange dropped as low as $3,520 a tonne, its weakest since September 2005. However it pared losses to trade up $44 at $3,665 a tonne at 1553 GMT as the dollar lost ground against the euro. In early New York trading, the euro rose 0.5 percent against the dollar to $1.2501 , clawing back from the two-week low of $1.2389 hit earlier in the global session. .DXY "The weak dollar is definitely the thing," said Justin Lennon, a copper analyst at Mitsui Bussan Commodities in New York. "(But) the outlook for the next six months is not good." "The Chinese output ... was weaker. Maybe that's giving a little bit of a push," Lennon said. China's industry output growth waned to its weakest level in seven years, data showed on Thursday, reinforcing evidence the financial crisis is plunging the world into a painful downturn. [ID:nLD705645] Analysts doubt the drop in China's production of copper and other metals will lead to tighter supply at a time when demand for raw materials is weakening. China said its output of the industrial metal dropped 8 percent on the year to an eight-month low in October as manufacturers cut production in response to weakening demand. [ID:nHKG209242] "That's not a surprise," said Judy Zhu, analyst at Standard Chartered Bank in Shanghai. "We've heard production cuts by smelters lately and I don't think it's going to create tight supply in the international market because the smelters are just trying to keep their inventory in check." China's production of refined copper fell to 293,900 tonnes in October, according to the National Bureau of Statistics. Aluminium output dropped 0.9 percent and nickel fell 18 percent but zinc output rose 3.6 percent. [ID:nHKG339295] HIGHER INVENTORIES Despite the cuts by producers, mostly Chinese smelters, stocks of copper in LME warehouses rose another 2,525 tonnes on Thursday to 272,625 tonnes, their highest since March 2004. LME aluminium MAL3 tracked copper higher to rise $13 to $1,938 a tonne. The large jump in inventories had earlier pushed prices down 1.1 percent to a low of $1,903 a tonne, the weakest level since October 2005. However, the increase in stocks was not unexpected, Calyon's Bhar said. LME aluminium stocks surged 44,425 tonnes, the biggest one-day rise since Oct. 14, to 1.56 million tonnes, enough for 15 days of global consumption and the highest on record for the contract. Volatile nickel MNI3 slipped to a low of $10,330 a tonne versus $10,500 but then jumped as high as $11,400 as producers cut output to combat off weaker demand. The metal was last at $11,250. BHP Billiton Ltd (BLT.L: Quote, Profile, Research, Stock Buzz) said on Thursday that it had scrapped a study on developing an integrated nickel project in eastern Indonesia. [ID:nSYU005525] London-listed mining firm Xstrata Plc (XTA.L: Quote, Profile, Research, Stock Buzz) also announced plans to cease operations at Craig and Thayer-Lindsley nickel mines ahead of schedule. [ID:nWLB3695] Lead MPB3 jumped to $1,359.75 a tonne from $1,300 and was last at $1,337.75, while tin MSN3 was at $13,950 from $13,700. Zinc MZN3 climbed 5.2 percent to a one week high of $1,210 versus $1,150 before easing back to $1,195.25. However, analysts offered base metals a glimmer of hope, saying said both zinc and lead prices, which have both been boosted by short-covering in recent days, could be close to a bottom. Metal Prices at 1558 GMT Metal Last Change Pct Move End 2007 Ytd Pct move LME Cu 3655.00 34.00 +0.94 6670.00 -45.20 SHFE Cu* 29050.00 -190.00 -0.65 56880.00 -48.93 LME Alum 1932.00 7.00 +0.36 2403.00 -19.60 SHFE Alu* 13630.00 -130.00 -0.94 18180.00 -25.03 COMEX Cu** 164.50 -0.45 -0.27 303.05 -45.72 LME Zinc 1192.00 42.00 +3.65 2370.00 -49.70 SHFE Zinc* 9565.00 95.00 +1.00 18950.00 -49.53 LME Nick 11125.00 625.00 +5.95 26350.00 -57.78 LME Lead 1334.00 34.00 +2.62 2550.00 -47.69 LME Tin 14080.00 380.00 +2.77 16400.00 -14.15 ** 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 Karen Foster)

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