* Lead touches three-year high
* Minmetals Resources offers to buy Equinox Minerals
* Copper inventories down, will fall further -analysts
(Updates with closing prices)
By Silvia Antonioli and Rebekah Curtis
LONDON, April 4 (Reuters) - Copper fell on Monday, reversing early gains as investors shifted their focus from upbeat U.S. economic data to recent softness in demand from China, where the markets will be closed until Wednesday.
Battery material lead touched a three-year high of $2,835 a tonne on expectations of increasing Japanese demand for batteries to provide back-up power to help cope with the effects of damage to nuclear power plants.
Three-month copper on the London Metal Exchange (LME) closed at $9,330 a tonne, off a session high of $9,475 and versus a last bid at $9,359 on Friday, when it touched a two-week low of $9,263.25.
In the last few months poor spot demand for copper in China caused some to think the supply deficit will be lower than previously expected but most analysts still predict a substantial deficit this year.
The world's top copper producer, Chile, forecast in January a copper supply deficit of 466,000 tonnes in 2011, up from a shortfall of 90,000 tonnes in 2010.
Trading volumes were light during a two-day market holiday in China.
"When the Chinese are absent... the markets tend to get a drifting feeling," RBC Capital's head of base metals, Alex Heath, said.
"It's just the short-term picture that's a bit cloudy at the moment," Heath added.
Strong data on the labour market and manufacturing from the U.S. earlier helped bolster investor sentiment about demand for industrial metals.
"I'm fairly positive on the state of the U.S economy in the near-term," Carl Firman, an analyst at Virtual Metals, said, although he added that the world's top economy still faced headwinds.
"Chinese demand appears soft, Firman added "There's reports of high stock levels in bonded warehouses."
But he also voiced optimism about the country's demand longer-term, saying "the bull market in China is still very much alive."
Meanwhile, Japan's industry was hit hard by the earthquake and tsunami three weeks ago that also crippled a nuclear plant and started an energy crisis in the country.
"We still expect reasonably resilient growth for commodities such as copper even though we won't see the sort of growth that we saw last year," said Daniel Major, analyst at RBS, adding that 2010 growth came from a low base in 2009.
"Underlying fundamentals for copper are reasonably supportive."
COPPER STOCKS
Inventories of copper at the London Metal Exchange fell 950 tonnes to 437,900 tonnes, latest data showed. Copper stocks are up by about a quarter from mid-December.
Copper stocks in China are abnormally high and need to be watched carefully as some companies use the metal as a financing tool, the head of the world's top copper producer, Codelco, said on Monday.
Copper demand is generally slower in the first quarter and picks up in the second quarter and expectations are for more outflows of inventories over the next few weeks.
Lead rose more than 5 percent to touch its highest since April 2008. The metal later closed at $2,752 a tonne from $2,698 at the close on Friday.
Tin closed at $31,625 from a last bid of $31,500 while zinc was at $2,417 from $2,390 a tonne at Friday's close.
Aluminium, untraded at the close, was last bid at $2,632 from $2,631 and nickel closed at $25,500 from $25,600.
Minmetals Resources, China's biggest metals trader, on Monday offered $6.5 billion to buy Equinox Minerals which has copper assets in Zambia and Saudi Arabia.
Metal Prices at 1636 GMT Comex copper in cents/lb, LME prices in $/T and SHFE prices in yuan/T Metal Last Change Percent Move End 2010 Ytd Percent
move COMEX Cu 424.95 -0.90 -0.21 444.70 -4.44 LME Alum 2632.00 1.00 +0.04 2470.00 6.56 LME Cu 9329.00 -101.00 -1.07 9600.00 -2.82 LME Lead 2752.00 54.00 +2.00 2550.00 7.92 LME Nickel 25500.00 -100.00 -0.39 24750.00 3.03 LME Tin 31625.00 -175.00 -0.55 26900.00 17.57 LME Zinc 2417.00 27.00 +1.13 2454.00 -1.51 SHFE Alu 16755.00 -20.00 -0.12 16840.00 -0.50 SHFE Cu* 70440.00 -260.00 -0.37 71850.00 -1.96 SHFE Zin 18170.00 -70.00 -0.38 19475.00 -6.70 ** Benchmark month for COMEX copper * 3rd contract month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07
(Editing by Anthony Barker)