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METALS-Copper sinks to 3-week low on profit-taking, demand angst

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* LME/ShFE arb: * Discount for cash over 3-month copper highest since 2009

* Nickel slides on talk of higher supplies from Indonesia

(Adds dollar, closing prices)

By Pratima Desai

LONDON, Sept 13 (Reuters) - Copper prices fell to three-week lows on Wednesday on profit-taking, rising stocks in London Metal Exchange warehouses, nervousness about demand in China and a higher dollar.

Benchmark copper ended down 1.9 percent at $6,543 a tonne from an earlier low at $6,529. Prices are up around 18 percent so far this year, partly due to a speculative frenzy in July and August.

"It looks like profit-taking, we could see more of this before it settles," Capital Economics senior commodities economist Caroline Bain said.

"China demand has surprised a little on the upside, but looking more closely at the data, construction has been contracting, that will drag on demand."

SPECULATORS: LME data shows funds' net long copper position at 71,827 lots, or more than 1.8 million tonnes, is down from a peak of 78,527 lots late in August but still near its highest since last December. DOLLAR: A higher U.S. currency makes dollar-denominated metals more expensive for non-U.S. firms, which could subdue demand from manufacturers. STOCKS: Copper stocks in LME approved warehouses are up 38,150 tonnes at 246,575 tonnes since last week.

DISCOUNT: Higher stocks and worries about an oversupplied copper market helped push the discount for the cash over the three-month contract to above $40 a tonne, its highest since December 2009. Traders say this suggests more metal will be delivered over coming days.

CONSTRUCTION: China's new property construction starts fell 7 percent in July year-on-year, the first fall since last September. Real estate investment in China rose 7.9 percent in January-July from the same period a year earlier, easing from 8.5 percent in the first half of this year. DATA: Markets are looking ahead to data from China on new loans, investment and industrial production due this week for clues on the strength of demand over coming months. ZINC STOCKS: Stocks of zinc in LME warehouses are up 25,250 tonnes at 267,050. A small premium for the cash over the three-month contract on Sept. 4 has over the last week turned into a $5 a tonne discount. Benchmark zinc was down 1.2 percent at $3,023.

NICKEL: Nickel ended down 5.2 percent to $11,360. Earlier, it fell to a 3-week low at $11,330 a tonne on talk of higher supplies from Indonesia, a top exporter.

SPREAD: The discount for cash nickel over the three-month at a 3-year high near $90 a tonne also suggests large deliveries to LME warehouses, traders said.

ELSEWHERE: Aluminium was down 1.3 percent at $2,110, lead fell 0.9 percent to $2,290 and tin slipped 0.8 percent to $20,515.

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Top base and precious metals analysis - GFMS LME/ShFE arb: ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Editing by Mark Potter, Greg Mahlich)

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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