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METALS-Base metals decline on demand worries as trade tension drags

Mai Nguyen

(Adds quotes, updates prices)

SINGAPORE, May 29 (Reuters) - Industrial metals fell on Wednesday on worries about the global growth outlook amid an extended trade war between China and the United States that has showed no sign of letting up.

In one of the latest potential developments, the editor in chief of China's Global Times said on Tuesday that Beijing was "seriously considering" restricting exports to the United States of rare earths, 17 chemical elements used in high-tech consumer electronics and military equipment.

China's Communist Party newspaper on Wednesday also warned the United States that the country was ready to use rare earths to strike back in their bitter trade war, saying in an extremely strongly worded commentary "don't say we didn't warn you".

"(Trade tension) is dominating the market at the moment and it's hard to see how that will change too much," said Daniel Hynes of ANZ.

"There have been plenty of positive fundamental factors emerging in recent time but the market has chosen to ignore them, so it's hard to say things can really recover on a sustainable basis," Hynes said.

FUNDAMENTALS

* COPPER: Three-month copper on the London Metal Exchange fell 0.2% to $5,946 a tonne by 0425 GMT, while the most-traded copper contract on the Shanghai Futures Exchange declined 0.6% to 46,930 yuan ($6,788.27) a tonne.

* LME: London aluminium dropped 0.4%, nickel eased 0.1%, zinc declined 0.7%, lead fell 1% and tin was 0.2% lower.

* SHFE: Shanghai aluminium fell 0.4%, while nickel tumbled 2.1% after several sessions of gains on short-covering by bearish investors.

* ZINC SPREAD: The premium of LME cash zinc over the three-month contract <CMZN0-3> was at $161 a tonne on Tuesday, latest data showed, indicating near-term shortages in the LME system.

* ZINC SUPPLY: The global refined zinc supply has been tight due to limited smelting capacity, but an expansion in smelting capacity in China is expect to increase the supply, but only to a certain extent.

* ZINC: "The supply side issues I don't think are going to turn around substantially and demand is holding relatively well. Our view has always been that the market will remain relatively tight," ANZ's Hynes said.

* CHINA SCRAP: China aims to grant import licences and a first batch of import quotas for soon-to-be restricted scrap metal by the end of June, an environment ministry spokesman said.

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PRICES

Three month LME copper

Most active ShFE copper

Three month LME aluminium

Most active ShFE aluminium

Three month LME zinc

Most active ShFE zinc

Three month LME lead

Most active ShFE lead

Three month LME nickel

Most active ShFE nickel

Three month LME tin

Most active ShFE tin

ARBS ($1 = 6.9134 Chinese yuan renminbi)

(Reporting by Mai Nguyen; Editing by Joseph Radford and Richard Pullin)