* Dollar index hits 11-1/2-year high
* Alcoa reviews 500,000 tonnes of smelting capacity
* China nickel premiums jump as country shuts old NPI plants (Updates with closing prices)
By Maytaal Angel and Eric Onstad
LONDON, March 6 (Reuters) - Copper prices hit their lowest in more than a week and notched up their biggest weekly loss in six weeks on Friday as the dollar rallied after a strong U.S. jobs report, with investors also worried about lacklustre demand in China.
The dollar touched an 11-1/2 year high against major currencies after the U.S. jobless rate fell to a more than 6-1/2-year low, which could encourage the Federal Reserve to consider raising interest rates in June.
A strong dollar makes dollar-priced metals costlier for non-U.S. investors.
In China, the world’s top metals consumer, equities fell as investors digested comments by top officials that highlighted the growth and debt challenges the country faces this year.
Three-month copper on the London Metal Exchange slid 1.5 percent to close at $5,745 a tonne, having hit its lowest since Feb. 24. On the week, copper lost 2.5 percent, its biggest weekly decline since late January.
“We’re still in a lull post Chinese New Year. I expect a bit of a pick-up but ... any price above $6,200-6,300 per tonne, copper will not stay there for very long,” Deutsche Bank analyst Grant Sporre said.
“We’re (still) in a surplus for this year and next ... even though mining companies have downgraded guidance and we’ve had 170,000 tonnes worth of disruptions so far this year,” he said.
Daily LME data showed copper inventories rose by 4,675 tonnes to 323,050 tonnes, their highest level since January 2014 and a surge of 83 percent so far this year. MCU-STOCKS
Analyst Mark Keenan of Societe Generale said downside risk prevails in the medium term given a significant fall in the cost of production that could lower the floor price for copper.
Aluminium ended down 1.1 percent at a seven-week low of $1,782 a tonne after Deutsche joined other banks in downgrading the metal, cutting its price forecast for this year by 7 percent to $1,916.
Investors seemed to shrug off potentially bullish news that major producer Alcoa said it was reviewing 500,000 tonnes or 14 percent of its smelting capacity.
LME nickel was the only LME metal in positive territory, closing 1.2 percent higher at $14,370 a tonne.
Bonded nickel premiums jumped by $20 after a city in eastern China closed several factories, including many nickel pig iron producers, as the government steps up enforcement of a new environmental law. NI-BMPBW-SHMET
Zinc ended unchanged at $2,020 a tonne, having hit its lowest since mid-January, and tin shed 0.2 percent to $18,100 a tonne.
Lead, untraded in closing rings, was last bid down 0.1 percent to $1,819, and notched up its biggest weekly gain since May 2013 at about 5 percent.
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
Three month LME tin (Additional reporting by Melanie Burton; Editing by Dale Hudson and David Evans)