METALS-Copper ends lower as dollar, demand worries bite

* U.S. data lifts dollar, saps early copper strength

* Aluminum inventories hit record high again

(Refiles with METALS tag on headline)

(Recasts, updates with New York closing copper prices, adds
NEW YORK to dateline and analyst comments)

By Chris Kelly and Michael Taylor

NEW YORK/LONDON, June 30 (Reuters) - Copper erased earlier
gains to close lower on Tuesday, under pressure from a firmer
dollar, quarter-end positioning, and growing perceptions that
prices have risen too far in the face of a poor fundamental
backdrop.

"All we have seen over the last few weeks is massive fund
selling and that appears to be really coming through today at
the end of the quarter as funds unload commodities, with
copper, a key industrial commodity, at the forefront," said
Michael Gross, futures analyst with Optionsellers.com in Tampa,
Florida.

Copper for September delivery HGU9 on the New York
Mercantile Exchange's COMEX division fell 5.40 cents to close
at $2.2720 a lb. Earlier, the metal used in power and
construction climbed to a new two-week high at $2.3650.

On the London Metal Exchange (LME), copper for three month
delivery MCU3 settled down $65 at $4,970 a tonne, after
earlier rising to a high of $5,180.

"The market seems to have topped out," said Alex Heath,
head of base metals trading at RBC Capital Markets. "It has
been following the dollar ... (but) there is a technical
expectation that some of the markets have got ahead of
themselves."

The dollar rose against the euro amid renewed investor risk
aversion after a report showed an unexpected drop in U.S.
consumer confidence in June. A stronger U.S. currency makes
metals priced in dollars more expensive for holders of other
currencies. [ID:nN30263841] [USD/]

Copper prices have risen nearly 60 percent this year but
are expected to come under greater pressure in coming months,
as markets face a seasonally quiet trading period and as a
supportive restocking process from China fades.
[ID:nPEK124145]

"SRB purchases are almost over," said Eugen Weinberg, an
analyst at Commerzbank, referring to purchases by China's State
Reserves Bureau which have underpinned the copper price for
much of 2009.

"As soon as the market realises that ... and that
production has increased while demand has declined, the market
will turn sharply."

Some analysts also reported scattered speculation that the
SRB could act as a seller.

A recent spate of mixed data has sparked erratic moves in
industrial metals prices and investors struggled to assess the
the economic climate.

World Bank President Robert Zoellick said developing
countries were only now feeling the full force of the global
economic and financial crisis, which could quickly return to
advanced economies where it began. [ID:nN30449095]

Investors will keep a keen eye on data this week including
U.S. June jobs and manufacturing on Thursday. [ID:nSP459462]

QUARTER ON QUARTER

Copper has risen by about 21 percent so far this quarter,
shy of a gain of more than 30 percent in the first quarter, and
after slumping more than 50 percent in the last quarter of
2008.

Analysts and traders warn this year's gains exceed weak
underlying fundamentals, as the world grapples with the
aftermath of the credit crisis.

"There's a chance of a renewed correction in the third
quarter," said Stephen Briggs, commodity strategist at RBS
Global Banking and Markets. "We're going to clearly see lower
Chinese imports in July and August."

Among other industrial metals, aluminum MAL3 closed down
$10 at $1,630. LME stocks of the metal used in transport and
packaging hit a record high, rising 27,350 tonnes to near 4.4
million tonnes.

Aluminum, up about 16 percent in the second quarter, is on
track to close out its best quarter since the end of March 2008
when it gained 24 percent.

Zinc MZN3 ended at $1,545 from $1,560, while battery
material lead MPB3 closed at $1,690 from $1,703.

Tin MSN3 was last bid at $14,150 from $14,600 and nickel
MNI3 was at $15,350 from $15,800. Nickel, up about 60 percent
this quarter, is on track to close its strongest three months
since the fourth quarter of 2003.

Metal Prices at 1851 GMT
Metal Last Change Pct Move End 2008 Ytd
Pct
move
COMEX Cu 226.30 -4.95 -2.14 139.50
62.22
LME Alum 1629.00 -11.00 -0.67 1535.00
6.12
LME Cu 4970.25 -64.75 -1.29 3060.00
62.43
LME Lead 1693.00 -10.00 -0.59 999.00
69.47
LME Nickel 15411.00 -389.00 -2.46 11700.00
31.72
LME Tin 14275.00 -475.00 -3.22 10700.00
33.41
LME Zinc 1546.00 -35.00 -2.21 1208.00
27.98
SHFE Alu 13435.00 15.00 +0.11 11540.00
16.42
SHFE Cu* 40810.00 530.00 +1.32 23840.00
71.18
SHFE Zin 13420.00 -20.00 -0.15 10120.00
32.61
** 1st contract month for COMEX copper * 3rd contract month
for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07
(Additional reporting by Rebekah Curtis in London; editing by
Keiron Henderson/Marguerita Choy)