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METALS-Demand doubts drive copper towards biggest monthly fall since 2015

Peter Hobson

(Updates throughout, moves dateline from SINGAPORE)

LONDON, May 31 (Reuters) - Copper was set for its biggest monthly fall since November 2015 as weak Chinese factory data and a U.S. threat to impose tariffs on Mexican goods fanned fears that trade disputes will damage the global economy and demand for metals.

Benchmark copper on the London Metal Exchange (LME)was down 0.4% at $5,828.50 a tonne at 1058 GMT.

The metal used in power and construction is down 9% this month, its third straight monthly fall.

Most other industrial metals also fell in May, with zinc having its biggest monthly tumble since 2012.

"The fundamentals (for copper) are OK, it's the expectations that demand will be further undermined by tariffs and recession fears hitting prices," said Societe Generale analyst Robin Bhar, adding that copper was likely to target a January low of $5,725.

CHINA: China's factory activity in May slumped into a deeper contraction than expected. China is the world's largest consumer of metals.

MEXICO: U.S. President Donald Trump threatened tariffs on all goods from Mexico, starting at 5% and ratcheting higher, until illegal immigrants stopped entering the United States.

MARKETS: European stocks tumbled and sovereign bonds surged. Chinese stocks saw the biggest monthly decline since October and oil its steepest monthly drop in six months.

JAPAN: A small bright spot was Japan, where industrial output rebounded in April.

DOLLAR: The dollar dipped on Friday but is near two-year highs, making metals pricier for buyers with other currencies.

COPPER POSITIONING: Speculators' net short position in LME copper was equal to 7.1% of open contracts as of Wednesday, brokers Marex Spectron said.

FUNDAMENTALS: Supply side problems are likely to lead to a tighter copper market, supporting prices.

CHILE COPPER: Top producer Codelco reported an 18% year-on-year drop in its first-quarter copper output amid strike fears.

TC/RCs: Spot prices for refining copper concentrate have fallen to their lowest in 6-1/2 years.

ZINC: LME Zinc was 1.1% lower at $2,533.50 a tonne and down 10 percent in May, the biggest monthly decline since 2012. However, weak output from Chinese smelters is likely to persist longer than expected, keeping the market tight.

TIN: Benchmark tin was up 0.1% at $18,790 but down 4% in May after falling 8% in April. Stockpiles in LME-registered warehouses have more than quadrupled since early May and the premium for cash tin over three-month metal more than halved to $125, suggesting a supply squeeze has eased. <MSN0-3> <MSNSTX-TOTAL>

OTHER METALS: LME aluminium was up 0.5% at $1,790.50 a tonne and roughly flat this month. Nickel was down 0.5% at $12,115 and also broadly unchanged in May. Lead was up 0.1% at $1,806 and 6 percent lower this month.

(Reporting by Mai Nguyen; editing by Richard Pullin, Uttaresh.V and Alexander Smith)