UPDATE 7-Metals tumble on rising LME stocks

(Updates with New York closing copper prices, adds trader comments)

By Anna Stablum and Daniel Magnowski

LONDON May 29 (Reuters) - Industrial metals lead, zinc and tin fell sharply on Thursday, hit by waning demand and rising stockpiles in warehouses.

Tin MSN3 was the biggest loser, falling $2,600 or more than 10 percent to close at $21,100 per tonne, its lowest since April 15. Despite the steep fall, tin is still up 27 percent on the year so far.

Lead MPB3 and zinc MZN3 also took heavy knocks, closing down $76 at $1,952 and $140 at $1,980 respectively.

"Rising stocks are just a symptom of weaker demand and improving supply," analyst David Thurtell at BNP Paribas said.

Selling was widespread, with copper for delivery in three months MCU3, often seen as a benchmark of the metals market, breaking below key support at $8,000 a tonne to close at $7,890, down $205 and its lowest since March 20, after losing 1.2 percent in the previous session.

Stocks rose by 600 tonnes to 126,400 tonnes, and are up around 15 percent in a month on sluggish demand for copper, mainly used in the construction and power sectors.

"The buying that everyone has been looking for, in the form of Chinese imports, is just not there at these levels. The price must probably come down towards $7,800-$7,900 to trigger some decent commercial interest," JP Morgan's analyst Michael Jansen said.

At the New York Mercantile Exchange's COMEX division, copper for July delivery HGN8 settled down 13.65 cents, or 3.7 percent, at $3.5585 a lb, its lowest level on a closing basis since Feb. 15.

COMEX July copper prices have been in a steady decline over the past two months, breaking below the 50-day and 100-day moving averages.

"We are still above the 200-day moving average at around $3.48, but right now it certainly looks like we are in for a test of that key level," said Matthew Zeman, head of trading with LaSalle Futures Group in Chicago.

"If it breaks, we could see this market fall quite a bit. Once it's under the 200-day, people will be selling into rallies pretty much nonstop at that point," he added.

Lead and zinc suffered from rising LME stock levels, which are up by over 40 percent since the start of the year.

"The correction is accompanied by a steady rise in inventories. LME stocks of zinc and lead are now at their highest for a year and a half, and those of aluminium at their highest for the past four years," analysts at Commerzbank said in a report.

Before the close, lead hit its lowest level since last March at $1,912 per tonne, down 5.7 percent from Wednesday, with stocks up another 1,550 tonnes to 65,125.

Three-months zinc fell 6.7 percent to $1,977, its lowest since February 2006.

"We expect it (zinc) to continue to come under pressure ... as stocks continue to rise as the market moves further into surplus," a Barclays Capital report said.

Nickel lost momentum after trading in positive terrain earlier in the session, with prices down over 20 percent in the past month on sluggish demand from stainless steel producers.

Nickel MNI3 closed at a quote of $22,200/22,250 a tonne, down $300, after shedding 3.4 percent in the previous session.

The metal has fallen by over 15 percent so far this year as stainless steel producer demand, accounting for some 70 percent of the global nickel offtake, has disappointed.

Dealers watched the dollar, which briefly rallied on Thursday after a report showed the U.S. economy grew in the first quarter at a faster pace than previously expected.

The euro EUR= eased to $1.5522 against the dollar from $1.5641 late in New York.

A firmer U.S. currency makes dollar-priced metals more expensive for other currency holders and tends to cap prices.

Aluminium MAL3 fell $80 to close at $2,880 a tonne.

Metal Prices at 1745 GMT: Metal Last Change Pct Move End 2007 Ytd Pct

move LME Cu 7890.00 -205.00 -2.53 6670.00 18.29 SHFE Cu* 61460.00 -1010.00 -1.62 56880.00 8.05 LME Alum 2885.00 -75.00 -2.53 2403.00 20.06 SHFE Alu* 18945.00 -160.00 -0.84 18180.00 4.21 COMEX Cu** 356.90 -15.50 -4.16 303.05 17.77 LME Zinc 1980.00 -140.00 -6.60 2370.00 -16.46 SHFE Zinc* 17120.00 -540.00 -3.06 18950.00 -9.66 LME Nick 22050.00 -450.00 -2.00 26350.00 -16.32 LME Lead 1920.00 -108.00 -5.33 2550.00 -24.71 LME Tin 21025.00 -2575.00 -10.91 16400.00 28.20 ** 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 Chris kelly in New York; editing by Jim Marshall)