UPDATE 8-Copper off 7-1/2 mth low, supply problems support

* Copper rebounds after hitting 7-1/2 month low

* Freeport trimming production outlook supports copper

* Copper extends late-day gains on Chilean earthquake

* Dollar at fresh one-year high caps gains

* Aluminium touches 7-month low before bouncing back
(Recasts, updates with New York closing copper prices, adds analyst comments,
updates Chilean earthquake impact, adds NEW YORK to dateline)

By Anna Stablum and Chris Kelly

NEW YORK/LONDON, Sept 10 (Reuters) - Copper prices in New York and London
extended their session gains in electronic business on Wednesday after reports
of a powerful earthquake in the northern Chile copper mining area sparked a
late short-covering rally, analysts said.

Copper for delivery in three months MCU3 on the London Metal Exchange
ended the day at $6,840 per tonne, having hit $6,775 per tonne, its lowest
level since Jan. 22, and versus $6,815 on Tuesday.

In after hours trade, copper rallied as high as $6,970 per tonne.

In New York, copper for December delivery HGZ8 settled up 2.70 cents at
$3.1140 a lb on the New York Mercantile Exchange's COMEX division, rebounding
from an early-session low at $3.04.

A 5.8-magnitude earthquake struck northern Chile, the U.S. Geological
Survey said. The quake hit 63 miles (100 km) east of Iquique, Chile, near the
country's large copper mining areas. [ID:nN10448253]

However, Chile's Collahuasi copper mine, owned by global miners Xstrata
Copper (XTA.L) and Anglo American (AAL.L), was unaffected.

"The mine was not affected at all," Hernan Farias, union leader of workers
at the Collahuasi mine, said. "Operations are running normally."

Earlier, Freeport-McMoRan Copper & Gold Inc (FCX.N) said it was lowering
its 2008 copper and gold production outlook, due to an incident at its Grasberg
mine in Indonesia.

Initial estimates indicate about 150 million pounds of copper and 200,000
ounces of gold previously expected to be mined in 2008 will be deferred to
future periods. [ID:nN10391951]

"On the copper side the Freeport news could be a small catalyst," analyst
Eugen Weinberg at Commerzbank in Germany said. "The market's generally quite
pessimistic and this kind of news could change the mood," he said.

That pessimism was seen rooted in an ongoing rally in the U.S. dollar.

The dollar extended gains and climbed to a fresh one-year high versus a
basket of currencies, fuelled by declining oil prices.

"What's happening now is the dollar is rising and commodity prices across
the board ... whether it's metals, the energy complex, or the agricultural
complex are in a role reversal," said John Gross, director of metals management
at Scott Brass Inc in Cranston, Rhode Island, and publisher of the Copper
Journal. "This is now the driving sentiment in the market right now," he
added.

LME copper prices have slumped about 20 percent since their record high in
July of $8,940 a tonne, fuelled by the heavy flows of material into LME
warehouses which brought total copper stocks to around 203,900 tonnes -- the
highest level since March 2007.

Rising stocks have pulled down the backwardation -- the premium for cash
material MCU0 over three-month prices -- to $25 per tonne. On July 17, the
premium hit the year's high at $241, with a dominant position capturing most of
the market.

Aluminium MAL3, used in packaging and transport, touched $2,586, the
lowest since Jan. 29, before recovering to $2,626, from $2,603 on Tuesday.

CHINA FIGURES AMBIGUOUS

China's imports of unwrought copper and semi-finished copper products
unexpectedly fell just over 4 percent on the month in August, though narrowing
spreads between domestic and international markets likely spurred late buying
that will materialise this month.

"The Chinese trade data did not help prices ... It is very ambiguous," said
Lehman Brothers analyst Michael Widmer.

"It is an aggregate figure with unwrought copper and products together, so
it will be difficult to make out what refined copper imports were from those
figures."

In India, growth in copper demand is expected to nearly halve to 8-9
percent this fiscal year as a slowing economy and higher interest rates drag,
the India head of an international trade body said. [ID:nDEL315377]

Tin MSN3 fell by 3.9 percent or $720 to a low of $17,880 before trading
at $18,525/18,725, down from $18,600.

Lead MPB3 was higher at $1,799 against $1,770 and zinc MZN3 gained $32
to $1,750, while nickel MNI3 eased $150 to $18,350.
Metal Prices at 1910 GMT
Metal Last Change Pct Move End 2007 Ytd Pct

move
LME Cu 6930.00 115.00 +1.69 6670.00 3.90
SHFE Cu* 55220.00 -170.00 -0.31 56880.00 -2.92
LME Alum 2620.00 17.00 +0.65 2403.00 9.03
SHFE Alu* 16630.00 -350.00 -2.06 18180.00 -8.53
COMEX Cu** 312.35 2.85 +0.92 303.05 3.07
LME Zinc 1742.00 24.00 +1.40 2370.00 -26.50
SHFE Zinc* 13850.00 -30.00 -0.22 18950.00 -26.91
LME Nick 18500.00 0.00 +0.00 26350.00 -29.79
LME Lead 1797.00 27.00 +1.53 2550.00 -29.53
LME Tin 18425.00 -175.00 -0.94 16400.00 12.35
** 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 Humeyra Pamuk, editing by Matthew Lewis)