LONDON - Aluminium prices hit five-month highs on Monday as the market factored in resilient demand in top consumer China, falling inventories in exchange warehouses and stronger activity in the country's manufacturing sector.

However, sluggish volumes due to a holiday in China and some profit-taking saw aluminium on the London Metal Exchange retreat after the London open.

Benchmark aluminium on the LME was down 0.5% at $2,335 a metric ton at 1022 GMT, having earlier hit its highest since May 2 at $2,367.

"It seems Chinese aluminium demand over the past couple of months has been improving," an aluminium trader said, adding this could be seen in sliding stocks in warehouses monitored by the Shanghai Futures Exchange (ShFE).

ShFE aluminium stocks at 79,194 tons have tumbled 75% since the middle of May and are at their lowest since December 2016.

Macquarie analysts said the draw on ShFE aluminium stocks was "largely driven by resilient domestic demand, within which new energy...and power sectors have been key end use sectors".

In LME approved warehouses, aluminium inventories at 486,775 have dropped 17% since June and more metal is due to leave the LME system as seen in the cancelled warrants - material earmarked for delivery - at 64% of total stocks.

Concern about the availability of aluminium on the LME has narrowed the discount for the cash over the three-month contract to $21.80 a ton from 15-year highs of $55.5 hit in the middle of August.

Also offering support was expansion in China's manufacturing sector in September, which although at a slower pace than in August, helped to reinforce expectations the world's top consumer of industrial metals was stabilising.

Industrial metals overall came under pressure from a firmer U.S. currency, which makers dollar-priced metals more expensive for holders of other currencies.

Copper ceded 0.7% to $8,208 a ton, zinc fell 0.7% to $2,630, lead rose 0.2% to $2,175, tin gained 0.8% to $24,135 and nickel climbed 0.7% to $18,830.

(Reporting by Pratima Desai; editing by Kirsten Donovan)