METALS-Copper gains but economic outlook still fragile

* Copper stocks drop, aluminum stocks surge to record

* Tin jumps more than 5 pct to recoup losses

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

By Chris Kelly and Rebekah Curtis

NEW YORK/LONDON, July 13 (Reuters) - Copper settled up on
Monday, as another large outflow of material from London
warehouses provided some support, but the gains were held in check
by wariness over the demand outlook for industrial metals as
premature hopes for rapid economic recovery subsided.

Copper for September delivery HGU9 on the New York
Mercantile Exchange's COMEX division ended up 1.15 cents at
$2.2230 per lb, but further upside seemed doubtful, analysts
said.

"I would say that there is likely to be downside pressure in
copper as $2.20 (a lb) is still overbought given the economic
outlook and the supply/demand balance," said Bart Melek, Global
Commodity Strategist with BMO Nesbitt Burns in Toronto.

On the London Metal Exchange (LME), copper for three-months
delivery MCU3 closed up $35 at $4,895 a tonne.

Despite the positive settlement, analysts remained cautious
about the economic outlook, saying that recovery could be
protracted and difficult.

"There is a great deal of uncertainty," said Fairfax
investment bank analyst John Meyer, adding that the market was
waiting for something to give it firmer direction. "There is
clearly more negative news to come out of the manufacturing
industry."

"The market is very much torn between positive news in Asia,
different news in Western markets and the potential for some
recovery," he added.

Adding to a recent slew of mixed economic indicators, data
showed Japanese industrial output climb 5.7 percent in May.
[ID:nT184581]

Stocks of copper at LME warehouses fell 1,350 tonnes to
257,225 tonnes.

Currency markets provided some support as the dollar edged
lower against a basket of currencies, making dollar-priced metals
cheaper for holders of other currencies. [USD/]

RECORD ALUMINUM STOCKS

Highlighting potential price vulnerability, stocks of aluminum
continued to rise -- hitting a record high above 4.4 million
tonnes.

Aluminum MAL3 closed at $1,561 a tonne from $1,572 at the
close on Friday, after data showed stocks of the metal used in
transport and packaging surge 43,125 tonnes overnight.

Aluminum stocks have risen almost consistently this year amid
the downturn in the auto sector, but confidence in Chinese
purchases and signs of a better economic outlook have lifted
aluminum demand recently, but analysts warn fundamentals remain
poor.

"Chinese demand for aluminum remains robust ... However, some
of the recent strength can be explained by government purchases
and a restocking effect," Standard Bank said in a note.

"Restocking is finite and the Chinese government has now
officially ended its non-ferrous metals stockpiling, so demand
will moderate in the coming months and imports will normalise."

Zinc MZN3 closed at $1,440 from $1,493 late on Friday, while
battery material lead MPB3 closed at $1,555 from $1,595.

Tin MSN3 closed at $12,300 a tonne from $11,950, having
earlier jumped more than 5 percent to touch $12,600, with traders
and analysts citing a correction from last week's hefty losses, as
well as some bargain hunting.

Prices slid 14 percent last week, partly because of a drop in
the premium for material in September against the December
contract. The premium had indicated a potential supply shortage.
The spread now stands at $590 a tonne from $850 early last week.

Traders said last week's losses were also due to worries that
the LME would take action to curb long tin positions reflected in
that premium. [ID:nL6246168]

Steel-making ingredient nickel MNI3 closed at $14,725 from
$14,490. Investors will be keeping an eye on developments at Vale
Inco's Sudbury nickel mine in Canada where unionized workers began
a strike on Monday. [ID:nN13184910]
Metal Prices at 1857 GMT
Metal Last Change Pct Move End 2008 Ytd Pct

move
COMEX Cu 222.15 2.10 +0.95 139.50 59.25
LME Alum 1562.50 -9.50 -0.60 1535.00 1.79
LME Cu 4900.00 40.00 +0.82 3060.00 60.13
LME Lead 1569.00 -56.00 -3.45 999.00 57.06
LME Nickel 14765.00 275.00 +1.90 11700.00 26.20
LME Tin 12300.00 350.00 +2.93 10700.00 14.95
LME Zinc 1460.00 -33.00 -2.21 1208.00 20.86
SHFE Alu 13345.00 -55.00 -0.41 11540.00 15.64
SHFE Cu* 39090.00 -390.00 -0.99 23840.00 63.97
SHFE Zin 12700.00 -440.00 -3.35 10120.00 25.49
** 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 Kylie MacLellan in London)
(Editing by Peter Blackburn and Lisa Shumaker)