METALS-Supply squeeze pushes copper spreads to record levels

(Updates prices, recasts)

LONDON, Oct 18 (Reuters) - Weak Chinese and U.S. economic data on Monday stalled a rally in copper prices even as a supply squeeze forced traders to pay unprecedented premiums for quickly deliverable metal.

With stocks of available copper in the London Metal Exchange (LME) system tumbling to the lowest levels in decades, the premium for cash metal over the three-month contract rose above $1,100 a tonne, almost double the previous record high set in 1987.

Benchmark three-month copper was down 0.7% at $10,213 a tonne at 1701 GMT (1:31 p.m. EDT), having risen 10% last week.

Earlier on Monday it reached $10,452.50, within spitting distance of May's record high of $10,747.50.

Copper's short-term price direction will depend on whether more metal arrives in LME warehouses to alleviate the squeeze, said Robin Bhar, an independent analyst.

He said it was not clear if low exchange stocks pointed to a genuine shortage, or if metal was available in private storage, but that rising demand meant copper's longer-term fundamentals are bullish.

LME STOCKS: On-warrant LME copper inventories plunged from more than 150,000 tonnes a month ago to just 14,150 tonnes on Friday, before rising to 21,050 tonnes.

DOMINANT HOLDER: Exacerbating the squeeze, one entity controls between 50% and 79% of LME copper warrants, exchange data show.

ShFE STOCKS: Copper inventories in Shanghai Futures Exchange (ShFE) warehouses, at 41,668 tonnes, are the lowest since 2009.

CHINA GROWTH: China's economy grew by 4.9% in the third quarter, its slowest pace in a year, hurt by power shortages, supply chain bottlenecks and troubles in the property market. China is the biggest consumer of metals.

FACTORIES: Production at U.S. factories fell by the most in seven months in September.

ZINC/ALUMINIUM: LME aluminium was up 0.5% at $3,186.50 a tonne after touching $3,229, the highest level since 2008. Zinc was down 2.4% at $3,702.50 a tonne, having reached $3,944, it's highest mark since 2007, on Friday.

Both metals have been boosted by supply cuts.

NICKEL: Nickel was unchanged at $20,020 a tonne, with Brazilian miner Vale saying it has once again halted operations at its Onca Puma nickel mine.

OTHER METALS: Lead rose 1.9% to $2,382 a tonne and tin climbed 1.9% to $37,900 a tonne. (Reporting by Peter Hobson; Additional reporting by Mai Nguyen in Hanoi; Editing by Bernadette Baum, David Clarke and Paul Simao)

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