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METALS-Copper heads towards February lows as trade tensions rise

Pratima Desai

* Zinc hits two-month low on expectations of higher supplies

* Copper cancelled warrants near 27 percent

(Recasts, adds comment, changes dateline from Manila) LONDON, May 7 (Reuters) - Copper prices fell on Tuesday towards 2-1/2 month lows hit last week on worries about demand after U.S. President Donald Trump said he would raise tariffs on Chinese goods before U.S-China trade talks.

Benchmark copper on the London Metal Exchange was

down 1.1 percent at $6,167 a tonne at 1045 GMT. Last week, prices of the metal used widely in power and construction fell to $6,150, the lowest since Feb. 15. "The sell-off on the LME is a delayed reaction to Trump's comments over the weekend about higher tariffs," a copper trader said, adding that a break of the 200-day moving average around $6,190 had fuelled downward momentum.

TRADE: Trump on Monday slammed China over its trade practices, saying the United States was losing billions to Beijing and vowing to protect American commerce as tension escalated. Over the weekend, Trump said he would ratchet up tariffs on $200 billion worth of imports from China, the world's largest consumer of industrial metals. TALKS: Chinese Vice Premier Liu He will visit the United States this week for trade talks, Beijing said on Tuesday, playing down the sudden increase in tensions. INTL FCStone analyst Edward Meir said the process of "revamping U.S.-China trade flows" would be complex and throw up many challenges. "These now seem to be emerging and potentially could be severe enough to sink a deal altogether." INVENTORIES: Also weighing on copper prices are climbing stocks <MCUSTX-TOTAL> in LME approved warehouses, which at 230,075 have more than doubled since the middle of February. Partly offsetting that rise are cancelled warrants -- metal earmarked for delivery -- at nearly 27 percent of the total. "Funds trade on the headline stocks change, they don't look at the picture underneath," a copper industry source said. STIMULUS: China's central bank said on Monday it will cut reserve requirement ratios to release about 280 billion yuan for some small- and medium-sized banks, in a targeted move to help companies struggling amid an economic slowdown. MAIKE GROUP: The founder of Maike Group, one of China's biggest metals traders, sees benchmark LME copper prices recovering to $6,500-$6,600 a tonne this year amid stable demand from top consumer China. ZINC: Prices of the metal used to galvanise steel were down 2.1 percent at $2,715 a tonne. Earlier they hit a two-month low at $2,705 on concern about Chinese demand and rising supplies in the second half of the year as smelters restart and expand capacity.

PRICES: Aluminium was up 0.1 percent at $1,798, leadslipped 1.7 percent to $1,868, tin gained 0.9percent to $19,495 and nickel ceded 0.8 percent to

$12,090 a tonne.

(Reporting by Pratima Desai Editing by Edmund Blair)