METALS-Copper steadies as fund flows offset demand doubts

* China Q3 GDP up 8.9 percent as expected, most metals output up

* Dollar recovers from 14-month lows after China data

* Rising inventories keep price gains in check

LONDON, Oct 22 - Copper held steady on Thursday as strong investment interest offset a rebound in the dollar and worries that prices had run ahead of fundamentals.

Copper for three-months delivery on the London Metal Exchange traded at $6,595 a tonne in official rings from a close of $6,590 on Wednesday, when the metal used in power and construction hit $6,665, its highest since September last year.

"There's hell of a lot of good news priced in at these levels. There's no real physical demand for copper ... stocks are up again this morning, this is all driven by speculators ..." said Davdid Thurtell, analyst at Citigroup.

He added, however: "We've lost output from Olympic Dam, the Spence strike goes on. The big macro funds, its not a concern for them if it (copper) comes off a bit."

The dollar rose broadly as a slide in global share prices cooled risk demand. A stronger dollar makes dollar-priced metals more expensive for non-U.S. investors. China's annual economic growth quickened to 8.9 percent in the third quarter, as expected and refined copper output in the world's largest metals consumer rose to a record 394,800 tonnes in September.

Chinese refined production of zinc, nickel and primary aluminium also increased and industrial production rose to 13.9 percent in September from a year ago.

"The data painted a robust picture of demand in China and taken in conjunction with supply-side issues there's still a very persuasive story in copper, even without signs of recovery in Europe," said Nicholas Snowdown, analyst at Barclays Capital.

Workers at Chile's Spence copper mine plan to resume wage talks with owner BHP Billiton to solve a nine-day strike, while worker's at Chile's Andina copper mine demanded a five percent wage hike to owner Codelco.

Copper prices have more than doubled this year supported by fund flows, economic data signalling recovery, a struggling dollar and record Chinese imports in the first half.

More recently, however, rising inventories on the London Metal Exchange capped further price gains as the demand outlook remained cloudy.

Latest LME data showed copper stocks rose 1,525 tonnes to total 364,075 tonnes, the highest since mid-May and up more than 50 percent since the middle of July.

ZINC JUMPS

In other metals, zinc was boosted by prospects for increased demand in China.

"Zinc has firmer premiums. It is one of the metals that stands to gain most leverage from fiscal stimulus in China. Investment in infrastructure ... in September was a key source of support for galvanised steel," said Snowdown.

Three-month LME zinc rose to $2,265 a tonne, the highest since May 2008 and traded at $2,258 in official rings versus $2,235 on Wednesday.

Among other industrial metals, aluminium traded at $1,981.50 from $1,966, having earlier hit a 2-month high of $1,999.75 while battery material lead traded at $2,436 from $2,445.

Tin was flat at $14,500 from $14,450, and steel-making ingredient nickel was at $19,550 from $19,735.

Metal Prices at 1219 GMT Metal Last Change Percent Move End 2008 Ytd Percent

move COMEX Cu 297.50 -5.15 -1.70 139.50 113.26 LME Alum 1974.00 8.00 +0.41 1535.00 28.60 LME Cu 6613.00 23.00 +0.35 3060.00 116.11 LME Lead 2435.00 -10.00 -0.41 999.00 143.74 LME Nickel 19530.00 -205.00 -1.04 11700.00 66.92 LME Tin 14400.00 -50.00 -0.35 10700.00 34.58 LME Zinc 2240.00 5.00 +0.22 1208.00 85.43 SHFE Alu 14985.00 20.00 +0.13 11540.00 29.85 SHFE Cu* 50460.00 430.00 +0.86 23840.00 111.66 SHFE Zin 16445.00 240.00 +1.48 10120.00 62.50 ** 1st contract month for COMEX copper * 3rd contract month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07