UPDATE 1-KME H1 copper, alloys product output down 30 pct

* Weak industrial demand hits output

* KME and core shareholder Intek reshuffle holdings

(Adds details)

MILAN, Aug 7 (Reuters) - KME Group, one of the world's leading manufacturers of copper and copper alloy products, said on Friday its output including special products fell 30 percent in the first half of 2009 as economic downturn eroded demand.

Milan-listed KME (KME.MI) said its output dropped to 218,000 tonnes in the January-June period from 313,000 tonnes in the same period a year ago.

"There is persistent uncertainty and fears that an impulse to industrial activity triggered by a necessity to rebuild stocks will not be sufficient to consolidate recovery," KME said in a statement.

Consumption of the red metal widely used in power and construction is very sensitive to economic shocks.

Metal price volatility creates uncertainty and makes it difficult for consumers to take purchase decisions, KME said.

The economic downturn put the brakes on new residential construction, hitting demand for semi-finished products for the sector. But such products partially benefited from a fall in copper prices earlier this year which eased competition from cheaper materials, including plastic, KME said.

Semi-finished products earmarked for industry have been hit harder because of a slowdown in investment in new plants and machinery as well as by a falling demand for durable goods, it said.

KME consolidated revenues plunged 45 percent to 898.5 million euros ($1.29 billion) in the first six months of 2009. KME swung to a consolidated net loss of 20.1 million euros in the first half from a 12.3 million euro net profit a year ago.

KME and its core shareholder, holding company Intek (TEKI.MI), have agreed to reorganise their holdings.

Industrial assets, including ErgyCapital (ECY.MI) which specialises in investments in solar energy, will be grouped under KME Group's umbrella while Intek would focus on financial investments, KME and Intek said in a separate joint statement. ($1=.6966 Euro)

(Reporting by Svetlana Kovalyova)