Adds JP Morgan, CRU comments, updates prices

By Eric Onstad

LONDON, Nov 15 (Reuters) - Aluminium prices surged on Friday after China said it would cancel export tax rebates, fuelling worries that a heavy flow of shipments abroad may be curbed.

Three-month aluminium CMAL3 on the London Metal Exchange soared as much as 8.5% to $2,730 a metric ton and was up 6.6% at $2,682 by 1540 GMT.

At its peak on Friday, the lightweight metal came within spitting distance of a five-month high of $2,732 hit last week on supply disruptions of bauxite and alumina, the raw materials to make primary aluminium.

China's finance ministry said on Friday it would cancel export tax rebates for aluminium and copper products, effective Dec. 1.

"If you're not awarding rebates then more metal remains domestically in China and it could tighten the market in the rest of the world," said Nitesh Shah, commodity strategist at WisdomTree.

China exports 4-6 million tons annually of semi-fabricated aluminium, amounting to about 7% of global supply, JP Morgan said in a note.

Analyst Ross Strachan at consultancy CRU said the longer term impact was less clear cut.

"It will encourage growth in exports, and hence production, of finished goods in China and in due course China may need less primary (aluminium) imports."

Copper CMCU3 gained 0.4% to $9,025 a ton after hitting a three-month low on Thursday. China is not a major exporter of copper products.

Base metals got a boost from a weaker dollar index =USD, making commodities priced in the U.S. currency less expensive for buyers using other currencies. USD/

Most of the complex pared gains, however, after the dollar recovered in the wake of U.S. data showing U.S. retail sales increased slightly more than expected in October.

A host of uncertainties could still weigh on metals markets, Shah said.

"China seems to want to wait for confirmation of many things before they really bring out the stimulus bazooka and the problem is the market was already expecting the bazooka."

Data on Friday showed that China's factory output growth slowed in October and it was still too early to call a turn in the crisis-hit property sector.

LME nickel CMNI3 edged up 0.1% to $15,640 a ton, zinc CMZN3 was unchanged at $2,942.50, lead CMPB3 added 0.6% to $1,971.50 while tin CMSN3 dipped 0.1% to $28,905.

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(Reporting by Eric Onstad
Additional reporting by Ashitha Shivaprasad in Bengaluru; Editing by Kirsten Donovan, Shreya Biswas and Jane Merriman)

((eric.onstad@thomsonreuters.com; +44 20 7542 7093; Twitter https://twitter.com/reutersEricO; Reuters Messaging: eric.onstad.thomsonreuters.com@reuters.net))

      
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