Copper rallies to one-week high as dollar slips

* Copper rises 2 pct on weak dollar, lower stocks

* China Jan-Aug copper imports down 20 pct

* Chalco says confident about Chinese aluminium consumption (Recasts, adds comments, changes dateline, pvs SHANGHAI)

By Agnieszka Flak

LONDON, Sept 22 (Reuters) - Copper rallied to a one-week high on Monday as the dollar fell against the yen and the euro and as stocks fell in Asian warehouses, suggesting a pick-up of demand in China. Copper for delivery in three months MCU3 on the London Metal Exchange was up $140 at $7,180 a tonne by 0925 GMT from Friday's close of $7,060 after hitting a nine-month low of $6,625 earlier that week.

Earlier the metal used widely in the power and construction industries hit $7,215 a tonne, the highest since Sept. 15.

"The dollar has weakened and that has helped to support base metals," said Calyon analyst Robin Bhar.

The dollar fell against the yen and the euro as investors awaited details of a planned $700 billion U.S. bailout of bad mortgage debt. [USD/]

Markets around the world got a boost late last week after news of what is likely the biggest bailout in U.S. history, capping the historic week in which Lehman Brothers (LEHMQ.PK: Quote, Profile, Research, Stock Buzz) filed for bankruptcy protection. [ID:nSP4331]

Bhar also said a 3,100 tonnes fall in LME copper inventories suggested demand from China, the world's largest importer and consumer of the red metal, was starting to pick up.

Stocks have gone out primarily from the Gwangyang and Busan warehouses in Korea.

"These are all places close to China. Metals are clearly being shipped to China as demand is reviving after the summer and the Olympic slowdown," he said.

CHINESE DEMAND

China's copper imports have fallen since the start of the year due to soft demand, rising domestic output and high prices.

China's imports of refined copper fell slightly on the year to 87,168 tonnes in August, and also were down from 88,075 tonnes in July, the General Administration of Customs said on Monday. [ID:nBJB000489]

But China's implied copper demand rose 1.2 percent in August from July, Reuters calculations show, despite fears of a widespread slowdown due to factory closures for the Olympic games. [ID:nSP24116]

The discount for Shanghai's third-month copper futures versus the London benchmark, including China's 17 percent value-added tax, widened to 2,504 yuan from 1,312 yuan on Friday.

The difference flipped into a premium on Sept 9 for the first time since January.

"The positive arbitrage between the Shanghai prices and the LME is being taken advantage of," said Barclays Capital analyst Gayle Berry.

"We saw draws in LME stocks last weekend, and then again today. Whether or not that is an indication of a pick up in consumer buying does remain to be seen yet."

China's top aluminium producer Chalco (2600.HK: Quote, Profile, Research, Stock Buzz) said it planned to maintain its output despite low prices that may force higher-cost smelters in China to cut production [ID:nHKG284857]

Chinese primary aluminium prices have dropped by a 10th this month to about 15,600 yuan per tonne because of growing stocks, weaker demand and the global financial crisis.

Aluminium MAL3 gained $14 to $2,549 from Friday's close of $2,535 and recovering from an eight-month low of $2,490 reached earlier last week.

Lead MPB3 was up $5 at $1,905 and tin MSN3 $400 higher at $17,300.

Australia cut its estimates of annual zinc and nickel output on Monday, citing falling prices and a domestic energy crisis, but kept a bullish outlook for its giant mining industry despite fears of global recession. [ID:nSYD369086]

Nickel MNI3 was trading up $380 at $17,280 and zinc MZN3 at $1,807.50 from Friday's close of $1,758.

(Editing by Christopher Johnson)