LONDON, July 26 (Reuters) - Copper prices climbed to their strongest in two weeks on Tuesday as optimism about new infrastructure projects in top metals consumer China and concern about mine supply spurred speculators to buy back more short positions.

But it pared gains in European afternoon trading after the IMF cut global growth forecasts and U.S. consumer confidence dropped for a third straight month.

Three-month copper on the London Metal Exchange (LME) gained 0.7% to $7,528 a tonne by 1600 GMT after touching its highest since July 11 at $7,708 on the third straight day of gains.

U.S. Comex futures added 0.7% to $3.38 per lb.

Copper has rallied by about 10% since touching a 20-month low on July 15, largely owing to hopes for a recovery in China after COVID-19 lockdowns depressed an already slowing economy.

"This week China's policy banks started the first round of new investment projects," said Xiao Fu, head of commodity market strategy at Bank of China International in London.

"So we could see a speed up of infrastructure projects, which seems to be stabilising market confidence and propelling more short-covering."

Chinese local governments in June issued more than twice the amount of special bonds for infrastructure than in May and the highest monthly amount since at least 2019, finance ministry data showed on Tuesday.

Sentiment was also buoyed by news on Monday that China plans to launch a $44 billion real estate fund to help property developers to resolve a crippling debt crisis.

Prices also gained impetus from worries over supply as some miners struggled with output.

Chinese miner MMG on Monday said it had suspended its copper production targets for the year. That followed cuts last week to Vale SA and Antofagasta's copper output guidance.

"These miners ... have been struggling to meet the bottom end of their guidance ranges and in some cases lowering below," said CRU analyst Craig Lang in Singapore.

The production issues have come against a backdrop of falling LME inventories and rising physical premiums.

The Yangshan premium in China has risen to $84.50 a tonne, its highest since January, indicating tight near-term supplies.

In other LME metals, aluminium firmed by 0.4% to $2,418 a tonne, zinc climbed 1.3% to $3,023, lead gained 1% to $2,023.50, but tin was down 0.8% at $24,440 and nickel slid 3.3% to $21,505.

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($1 = 6.7548 yuan) (Reporting by Eric Onstad Additional reporting by Mai Nguyen in Hanoi Editing by Louise Heavens and David Goodman)