* LME aluminium stocks jump more than 70,000 tonnes
* Coming up: U.S. industrial production
(Recasts, adds comment/details, changes dateline from SINGAPORE)
By Pratima Desai
LONDON, Aug 17 (Reuters) - Expectations of strong physical demand and a weaker dollar drove copper prices up on Tuesday, despite growing doubts about economic growth prospects in the United States, the world's largest economy.
Focus was also on premiums for aluminium for nearby delivery due to tight supplies and dominant holdings of warrants on stocks of the metal in London Metal Exchange warehouses and cash contracts.
Benchmark copper on the LME was trading at $7,343 a tonne at 0957 GMT from $7,250 a tonne at the close on Monday.
The metal used in power and construction earlier on Tuesday touched $7,351 a tonne, close to the three-month high of $7,527 a tonne seen on August 4.
Industrial metal prices in recent days have come under pressure from U.S. economic data, showing signs of faltering growth, but losses have been limited.
"Prices are underscoring the relatively robust nature of physical conditions and from a business cycle perspective inventories remain fairly low," said Dan Brebner, analyst at Deutsche Bank.
"If economic conditions deteriorate there isn't going to be that much destocking as manufacturers have been quite disciplined ... The market is factoring in the fact that supply tightness is not going away."
As of August 16, stocks of copper in LME warehouses stood at 405,025 tonnes, a fall of about 25 percent since mid-February.
Cancelled warrants -- material already tagged for delivery -- on LME copper stocks stand at 6.75 percent of total stocks from around 5.5 percent a week ago. That is an indication of stronger demand.
"This should mean that copper stocks on the LME will fall below the 400,000 tonne mark for the first time since November 2009 soon," Commerzbank said in a note.
PICTURE
The weaker U.S. currency makes dollar-denominated metals cheaper for holders of other currencies.
Part of the reason behind dollar weakness has been data, showing U.S. economic recovery could be losing momentum. This has capped price gains.
The latest was news that U.S. home builders' optimism hit a near 1-1/2 year low in August and a regional manufacturing gauge grew more slowly than expected, implying the economic slowdown continued into the third quarter.
The market later on Tuesday sees U.S. housing starts and industrial production data for July.
Markets are also watching developments in China, the world's largest consumer of industrial metals.
Growth in the country is expected to slow, but not to levels where metals demand will deteriorate significantly. That will bolster base metal prices.
"The downside may be limited, as China passes its seasonal lull and as the market expects solid demand in the fourth quarter," ANZ said in a note.
Focus is also on aluminium trading, where large amounts have recently been offered and bought and a premium -- $5 a tonne -- for material for delivery on Wednesday compared with material for delivery on Thursday.
The premium or backwardation in the market overrun with supply is attracting aluminium to LME warehouse.
Stocks rose 70,825 tonnes to above 4.4 million tonnes on August 16.
"Backwardation will attract material. Rumours are that 500,000 to 1 million tonnes will be delivered in the next few days," a metals trader said.
Aluminium was at $2,137 a tonne from $2,118 on Monday, zinc at $2,115 from $2,073, lead at $2,133 from $2,095, tin at $21,350 from $21,100 and nickel at $21,950 from $21,550.
Metal Prices at 0946 GMT
Comex copper in cents/lb, LME prices in $/T and SHFE prices in yuan/T Metal Last Change Percent Move End 2009 Ytd Percent
move COMEX Cu 332.30 4.35 +1.33 334.65 -0.70 LME Alum 2132.00 14.00 +0.66 2230.00 -4.39 LME Cu 7340.00 90.00 +1.24 7375.00 -0.47 LME Lead 2128.00 33.00 +1.58 2432.00 -12.50 LME Nickel 21825.00 275.00 +1.28 18525.00 17.81 LME Tin 21200.00 100.00 +0.47 16950.00 25.07 LME Zinc 2112.00 39.00 +1.88 2560.00 -17.50 SHFE Alu 15530.00 35.00 +0.23 17160.00 -9.50 SHFE Cu* 57750.00 450.00 +0.79 59900.00 -3.59 SHFE Zin 17345.00 180.00 +1.05 21195.00 -18.16 ** Benchmark month for COMEX copper * 3rd contract month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07 (Reporting by Pratima Desai; editing by Alison Birrane)
