METALS-Copper slips as Iran war, rising stocks stoke demand fears

March 17 (Reuters) - Copper dipped on Tuesday as Iran launched fresh attacks on U.S. allies in the Gulf and London Metal Exchange inventories climbed to their highest in 6-1/2 years, while aluminium was lifted by concerns over supply from the Middle East.

Benchmark LME three-month copper CMCU3 was down 0.8% to $12,748.50 per metric ton as of 1015 GMT, after gaining 0.6% in the previous session, which was interrupted by a nearly three-hour technical halt.

The war in the Gulf saw no sign of an end, as Israel said it had killed Iran's security chief in airstrikes overnight and Tehran kept up attacks against neighbours that have pushed up energy prices, stoking inflation and growth fears.

Copper stocks in LME warehouses MCU-STOCKS rose to 330,375 tons, the most since late August 2019, following 13,500 tons of inflows into Kaohsiung and a further 4,900 tons into Baltimore.

The cash LME copper contract was at a steep $102 a ton discount to the three-month forward CMCU0-3, indicating no shortage of metal.

"I would basically conclude that copper is actually doing extremely well considering the contango we have in the London market ... the elevated level of inventories," said Ole Hansen, head of commodity strategy at Saxo Bank.

"We need to see some of these stockpiles being brought down. As we're having a prolonged conflict, that may impact the demand," he added.

The dollar =USD strengthened, making greenback-denominated commodities more expensive for traders using other currencies. The Federal Reserve is expected to keep rates steady on Wednesday.

Aluminium CMAL3 rose 0.9% to $3,423.50 a ton as top bauxite producer Guinea considers introducing export quotas for mining firms as early as this month, while the conflict in the Middle East kept traders concerned over supply of metal.

Zinc CMZN3 dropped 1.6% to $3,216 as 21,625 tons of deliveries into Singapore took LME zinc stocks MZN-STOCKS to their highest since July.

Lead CMPB3 rose 1.1% to $1,925, nickel CMNI3 lost 0.4% to $17,390 and tin CMSN3 slid 3.5% to $46,560.