LONDON, Dec 21 (Reuters) – Aluminium prices touched three-week peaks on Thursday as data showing lower output in China reinforced expectations of tighter supplies, but rising stocks in the top producer capped gains. Benchmark aluminium on the London Metal Exchange was down 0.2 percent at $2,118 a tonne at 1035 GMT from an earlier $2,128, its highest since November 28. Prices of the metal used widely in transport and packaging are up 25 percent so far this year as markets have factored in falling output in China, where the government has shut down aluminium capacity to cut pollution. ”A whole range of industrial materials are potentially going to see supply shortages because of the environmental crackdown in China, said SP Angel analyst John Meyer, adding that fund selling ahead of the year end would weigh on prices. OUTPUT: Wednesday’s data from the International Aluminium Institute shows Chinese aluminium production in November falling to 2.35 million tonnes from 2.546 million tonnes in Oct. IAI data also shows China produced 16.7 million tonnes in the first half of 2017, a rise of 1 percent from the second half of last year. That compares with a rise of 10 percent in the second half of last year from the first half. CHINA ALUMINIUM: China last year accounted for 55 percent of global output estimated at nearly 59 million tonnes against 11 percent of 25 million tonnes at the turn of the millennium. POSITIONING: Funds’ net long aluminium holdings on the LME have risen more than 10 percent to 137,448 lots or nearly 3.5 million tonnes since December 8. STOCKS: Aluminium stocks in warehouses monitored by the Shanghai Futures Exchange at a record 736,389 tonnes suggest surpluses, analysts say. 2018: Analysts expect China’s aluminium output to rise five percent next year and in 2019, a faster pace than demand, leaving a surplus that may head for export markets.