UPDATE 5-Copper slides, Japan data highlights bleak outlook

* Japan data reinforces poor demand prospects

* Copper to remain under pressure until supply cut

* Lead hits two-year low as battery demand plunges

(Updates prices to London close, adds comments)

By Pratima Desai

LONDON, Nov 28 (Reuters) - Copper prices slipped on Friday as tumbling industrial production data from Japan highlighted bleak prospects for demand in an oversupplied market.

Aluminium MAL3 hovered close to a three-year low and lead MPB3 fell to $1,073 a tonne, its lowest since July 2006, as traders priced in falling demand from the auto sector, where sales have plunged.

Benchmark copper for three-month delivery MCU3 on the London Metal Exchange (LME) ended at $3,620 a tonne compared with $3,696 at the close on Thursday.

Aluminium MAL3 closed at $1,769 a tonne from $1,792 on Thursday. Earlier it touched $1,745, close to a three-year low of $1,744 recorded on Nov. 21.

Stocks of metal in LME warehouses rose across the board and analysts say the problem for copper is that easing metal demand has not been matched by falling supplies.

"As long as you have an oversupplied market, prices will remain under pressure," said Michael Widmer, an analyst at BNP Paribas. "There will be surpluses next year and in 2010 ... The market needs to be rebalanced."

Analysts expect the copper market to see a surplus of about 1 million tonnes next year compared with 100,000 this year.

Over supply can be seen in rising stocks of copper, which at more than 290,000 tonnes, are up nearly 50 percent since September and the highest level since January 2004.

Copper, used extensively in power and construction, is down about 60 percent since hitting a record high of $8,940 a tonne in July, when doubts emerged about whether top consumer China would be able to offset falling demand elsewhere.

The latest data to hit sentiment was industrial output in Japan, which dropped 3.1 percent in October, raising fears the recession in the world's third-largest economy could be longer and deeper than previously expected. [TOPWRAP]

ALUMINIUM

Stocks of aluminium have jumped about 30 percent since September to above 1.8 million tonnes, the highest since December 1994.

The transport and packaging material has tumbled on the deteriorating outlook for auto makers. Car sales in the United States plummeted 32 percent in October to lows not seen for 25 years.

Aluminium, zinc and nickel have seen the largest production cuts due to lower prices and a grim outlook. While the zinc price has shown signs of stabilising the situation was different for the other two metals, RBS said in a report.

"Cuts in the aluminium industry now total 2.3 million tonnes per year and those in nickel mining are even greater as a percentage of production, but these markets are confronted by alarmingly high stocks and exceptionally weak demand," it said.

Stainless steel material nickel MNI3 was last at $10,200 from $10,250, zinc MZN3 closed at $1,205 from $1,220 and tin MSN3 was last bid at $12,300 from Thursday's last bid at $12,400.

Lead was lower at $1,104 from $1,106. The metal is expected to come under further pressure as battery makers cut production in line with car manufacturers.

"The thing that is really hitting lead is demand for new batteries," Widmer said. "Demand for replacement batteries looks as if it's holding up."

Demand for replacement batteries account for around 70 percent of total demand from the battery industry.

Metal Prices at 1646 GMT Metal Last Change Pct Move End 2007 Ytd Pct

move LME Cu 3607.00 -89.00 -2.41 6670.00 -45.92 SHFE Cu* 27870.00 -480.00 -1.69 56880.00 -51.00 LME Alum 1760.00 -32.00 -1.79 2403.00 -26.76 SHFE Alu* 12635.00 -310.00 -2.39 18180.00 -30.50 COMEX Cu** 160.50 -6.30 -3.78 303.05 -47.04 LME Zinc 1187.00 -33.00 -2.70 2370.00 -49.92 SHFE Zinc* 9560.00 -150.00 -1.54 18950.00 -49.55 LME Nick 10025.00 -225.00 -2.20 26350.00 -61.95 LME Lead 1101.00 -5.00 -0.45 2550.00 -56.82 LME Tin 12200.00 -200.00 -1.61 16400.00 -25.61 ** 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 Anna Stablum; editing by Sue Thomas)