METALS-Copper steadies after losses, on track for third week of falls

* Copper down close to 10 pct so far in Q2

* Nickel on track for biggest weekly falls in 15 months

* Coming up: U.S. consumer sentiment at 1355 GMT

(Updates prices, adds comment, detail; previous SYDNEY)

LONDON, June 13 (Reuters) - Copper recovered on Friday, as buying picked up a day after prices hit their lowest in 1-1/2 months, but the metal was still headed for its third straight week of falls due to concerns over demand and a probe into metals financing in China.

Three-month LME copper traded at $6,644 a tonne at 1008 GMT, up 0.4 percent. It fell to its lowest since May 1 in the previous session.

The metal, used in power and construction, has fallen close to 10 percent so far in the second quarter.

News this week that authorities are investigating the use of cargoes of metal as collateral in financing deals in China has raised fears about trade in the metal.

Concerns over fraudulent financing at some depots in Qingdao port has prompted some banks and merchants to cut credit for financing deals or relocate metal to better-known warehousing firms, including those that are part of the LME's vast system.

"We do expect to see an outflow (into LME warehouses). The question is whether it will be a disorderly dumping of stocks or whether financing deals will just be gradually unwound," Caroline Bain, economist at Capital Economics said in the Reuters Base Metals Forum.

"Our forecasts assume that the unwinding of the deals will put pressure on copper prices in Q3. We have (a forecast of) $5,800 for end-Q3 copper."

The trail that led investigators to a suspected metal financing scam at Qingdao which has spooked Western banks began with a Communist Party corruption probe 1,000 miles away in the old Silk Road city of Xining.

Traders also locked in profits ahead of the financial year end, said analyst Tim Radford of Sydney-based advisor Rivkin.

"We took profits today and we're pretty happy to be out, but given the strong support we have seen at current levels on copper, buyers may enter as the second half gets underway."

Investors are likely to monitor economic data from China closely to gauge the health of the world's top copper consumer as the economy has had a soft start to the year.

The Chinese economy showed some signs of stabilizing in May as the government unveiled more stimulus measures, but signs of further deterioration in the property market indicate more policy support may be needed.

Benchmark nickel continued its decline in Friday, falling 0.3 percent to $17,955 a tonne, having fallen to a two-month low. Nickel prices are down 5.5 percent so far this week, on track for their biggest weekly fall in nearly 15 months.

Nickel, up 30 percent so far in 2014, has been by far the best performing base metal after top producer Indonesia imposed a ban on shipments of unprocessed ore in January.

It hit a 27-month peak of $21,625 a tonne on May 13, but then prices have since slipped with some investors believing the rally may have been overdone.

Chief executives of Freeport McMoRan Copper & Gold Inc and Newmont Mining Corp are in Indonesia's capital, marking what might be a last-ditch effort to resolve a dispute over a mineral export tax before a new administration takes over in October.

A stoppage of copper concentrate exports from the country has put the brakes on a mine surplus expected to cap prices of copper the year.


Three-month LME copper

Most active ShFE copper

Three-month LME aluminum

Most active ShFE aluminum

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 in Sydney and Eric Onstad in London, editing by David Evans)