(Adds quotes, chart; updates prices)
By Mai Nguyen and Tom Daly
SINGAPORE/BEIJING, Dec 18 (Reuters) - Shanghai aluminium scaled a three-month high on Wednesday as easing tensions in the U.S.-China trade conflict fuelled optimism about better demand.
"Demand is good and China's output has not increased, so the price is relatively high. It is expected that demand will be better next year," said a source with a major aluminium smelter in China, the world's biggest user and producer of the metal.
Global investor confidence has improved since the United States and China last week said they reached a "phase-one" trade pact to cool their trade war that has hurt global economic growth and the demand for most base metals, including aluminium.
Aluminium, used in construction, packaging and transportation, is one of the metals most heavily targeted with U.S. tariffs in the 17-month-long trade war.
"Everyone has become optimistic," after news about the interim U.S.-China trade deal, the source added.
The most traded aluminium contract on the Shanghai Futures Exchange (ShFE) climbed as much as 1.1% to 14,125 yuan ($2,006.71) a tonne, a level not seen since Sept. 18.
Benchmark three-month aluminium on the London Metal Exchange (LME) was 0.5% higher at $1,772 a tonne by 0459 GMT.
* ALUMINIUM STOCKS: Inventories in warehouses tracked by ShFE AL-STX-SGH fell to their lowest since March 2017 at 218,367 tonnes. In contrast, stocks in LME-approved warehouses MALSTX-TOTAL rose to a 2-1/2-year high of 1.44 million tonnes.
* ALUMINA: China's average price of alumina SMM-ALM-AVEG, the substance used to make aluminium, fell to 2,429 yuan a tonne, its lowest since May 2017, lowering production costs for aluminium smelters.
* LEAD: China's lead production hit a record high of 572,000 tonnes in November, up 15.1% year-on-year, sparking oversupply concern and pushing ShFE lead to 14,750 yuan a tonne, its lowest since April 2018.
* BALANCE: But the global lead market recorded a deficit of 81,000 tonnes in the first 10 months of this year, compared with a shortage of 53,000 tonnes in the same period of 2018, the International Lead and Zinc Study Group (ILZSG) said.
* ZINC: The global zinc market moved to a surplus of 7,300 tonnes in October from a deficit of 21,100 tonnes in September. It recorded a global deficit of 152,000 tonnes in Jan-Oct, ILZSG said.
* OTHER PRICES: LME copper fell 0.5% to $6,171 a tonne, nickel rose 0.1% to $13,975 a tonne, while zinc advanced 0.4% to $2,290.50 a tonne. ShFE copper fell 0.3% to 49,090 yuan a tonne, while nickel dropped 1.6% to 109,740 yuan a tonne.
* MORGAN STANLEY: U.S. investment bank Morgan Stanley is building up its base metals trading business after abandoning it four years ago, sources told Reuters.
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Three month LME copper
Most active ShFE copper
Three month LME aluminium
Most active ShFE aluminium
Three month LME zinc
Most active ShFE zinc
Three month LME lead
Most active ShFE lead
Three month LME nickel
Most active ShFE nickel
Three month LME tin
Most active ShFE tin
ARBS ($1 = 7.0389 Chinese yuan)
Reporting by Mai Nguyen in Singapore and Tom Daly in Beijing; Editing by Aditya Soni and Sherry Jacob-Phillips