WRAPUP-Japan aluminium shipments improve but at slower pace

* Aluminium shipment fall narrows yr/yr,5th mthly gain in row * Unclear Japan domestic, export outlook weighs on metals By Chikako Mogi and Miho Yoshikawa TOKYO, Aug 27 (Reuters) - Japanese demand for rolled copper product and aluminium rose in July but it lagged levels of a year ago, reflecting a still-fragile recovery due to uncertain economic growth prospects both at home and in key export markets. Japanese shipments of aluminium products fell 19.7 percent in July from a year earlier but showed a 5 percent rise from June to 166,673 tonnes, the fifth straight monthly increase, helped by demand from the information technology and automobile sectors. The annual decline in July aluminium shipments, which include domestic and overseas sales, was smaller than a 21.6 percent yearly drop in June, but the month-on-month gain slowed from a 14.5 percent increase in June. Japan's economy emerged from recession in the second quarter but domestic demand remains weak and there is uncertainty over whether an export recovery driven by global government stimulus efforts is sustainable. Japan's output of rolled copper product fell to 62,117 tonnes in July on a seasonally adjusted basis, down 26.4 percent from a year earlier, preliminary data showed. The figure represented a 9.7 percent rise from the previous month for the fourth straight monthly gain, but slowing from a near 18 percent monthly gain in June. The year-on-year drop in June was almost 30 percent. Industry officials attribute the improvement to a rebound from sharp inventory cuts made from late last year after the global economic downturn caused demand for the industrial metal to shrink dramatically. Keizo Tani, head of the copper association's research department, said: "The recovery for copper products is led by demand from the semiconductor sector." He added, however, that copper product manufacturers were still worried about the sustainability of the recovery, as some held the view that current demand may be due in part to moves to build up depleted stocks. "There is some concern about how much of the current recovery is due to real demand, rather than demand stemming from a need to increase stocks again," Tani said. The slump in demand from late last year forced Japanese smelters to cut production of copper while Japanese firms aggressively cut back on aluminium stocks and also sharply reduced imports, with the economic crisis prompting major users such as the automobile and construction industries to cut consumption. "The improvement we see in the data is simply a rebound from the sharp decline in demand last year," said Tatsufumi Okoshi, a senior economist at Nomura Securities. "It's difficult to foresee the pace of demand accelerate from here, as it will likely take months before the global economy reaches a normal level seen before the economic crisis," he said, adding that oil demand appears to be showing signs of a slowdown, a trend likely to be followed by base metals. There are doubts about the sustainability of domestic demand, as much of the recovery has been tied to the government's stimulus measures, industry officials said. "Helped by some sectors such as automobiles and information, shipments are improving and nearing levels from a year ago," said an official at the aluminium association. "But sluggishness in the construction sector is weighing and prospects for a recovery in demand remain unclear," he said. The aluminium association has said it expects demand for the fiscal year to next March of about 1.7 million tonnes for flat-rolled and extrusion aluminium products. Demand for the two is typically over 2.0 million tonnes. Despite the slack demand, the aggressive cut-back in inventories may put base metals at risk of sharp rises in prices when demand recovers more strongly, Okoshi said. "In light of fairly improved supply/demand balances after production was cut sharply, supply is becoming tighter, putting upward pressure on prices when demand recovers," he said. (Editing by Ben Tan)