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METALS-Demand cheer helps copper hold near 26-month peak

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* Copper stocks in LME-approved warehouses lowest since 2005
* Premium for cash over 3-month LME contract hits 18-month high (Updates prices) By Pratima Desai LONDON, Sept 14 (Reuters) - Copper prices rose on Monday as strong demand in top consumer China, historically low inventories in London Metal Exchange approved warehouses and a lower dollar boosted sentiment and fuelled buying. Benchmark copper on the London Metal Exchange (LME) was up 0.8% at $6,790 a tonne at 1601 GMT.

Prices of the metal used widely in the power and construction industries earlier touched $6,792.5, not far from the 26-month of $6,830 hit at the start of September. "China has been quick to recover, partly because of all the stimulus. When factories restarted, there was a lot of restocking, which has helped tighten the market," said SP Angel analyst John Meyer. "Copper has been leaving warehouses at an accelerated pace."

DEMAND: Confidence in Chinese demand was reinforced by Chinese banks extending more new loans in August than expected, while broad credit growth quickened. Further clues on the strength of Chinese demand will come from August industrial production and urban investment data due on Tuesday. DOLLAR: A lower U.S. currency makes dollar-priced metals cheaper for holders of other currencies, which could boost demand. It also raises costs for miners in other currencies, so higher prices are required to protect margins. INVENTORIES: Stocks of copper in LME-approved warehouses, at 74,875 tonnes, are at their lowest since 2005, when the commodity price bull run took off, triggered by accelerating Chinese demand. Also fuelling worry about supplies on the LME are large holdings of warrants and cancelled warrants - metal earmarked for delivery and so no longer available to the market - at more than 50% of the total. This is why since early July cash copper has traded at a premium to the three-month contract . It closed at an 18-month high of $31.50 a tonne on Friday and was last at $23. OTHER METALS: Aluminium was up 1.5% at $1,802 a tonne, zinc rose 0.2% to $2,477, lead gained 1.7% to $1,922.5, tin added 0.3% to $18,165 and nickel climbed 1.2% to $15,280. (Reporting by Pratima Desai; editing by Emelia Sithole-Matarise and David Evans)

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