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By Julian Luk

LONDON May 10 (Reuters) - Aluminium prices dipped on

Friday after the London Metal Exchange (LME) data came in to

show an 88% jump in inventory.

The most traded three-month contract for aluminium

dipped to as low as $2,537 a metric ton, after inventory data

was published in the morning. Loss narrowed since then and it

was last trading 0.6% down at $2,544 as at 1044 GMT.

Aluminium stocks in LME-approved warehouses rose by 424,000

metric tons to 903,850 tons on Thursday, the highest since

January 2022.

A 135,350 tonnes were "re-warranted" to become tradable on

the exchange, which required warrants to activate metals for

being bought and sold.

While increasing inventory usually means relaxed supply and

could push down prices, aluminium could be an exception with

traders and warehouses cultivating new means to profit from

LME's post-sanction rule change on Russian metals last month.

"These delivery have little to do with fundamentals.

Aluminium spreads already went to steep contango, suggesting

that people were already expecting these stocks to come," said

Daniel Smith with AMT.

Discount of cash against three-month aluminium contract was

at $47 a ton, a condition known as contango usually accompanied

by relaxed supply.

For copper, eyes were on the growing gap between prices in

Chicago and Shanghai that could give rise to arbitrage

opportunities.

Some are looking for ways to re-export copper stocks out of

China to capture some arbitrage gains, a trader source said.

"Chinese traders have been selling imported copper, in

particular brands deliverable for Chicago Mercantile Exchange

(Comex) since last week," the source added.

Three-month copper rose 1.4% to $10,042 per metric

ton.

U.S. unemployment claims rose last week to the highest level

in more than eight months, raising expectations for rate cuts.

A rate cut could pressure the U.S. dollar. A weaker dollar

makes greenback-priced metals cheaper to holders of other

currencies.

Zinc advanced 1.3% to $2,946.5, lead

increased 0.2% to $2,238 and tin rose 0.4% to $32,710.

Nickel dropped 0.3% to $18,985.