February 28, 2019 / 1:13 PM / 6 months ago

METALS-Copper chalks up biggest monthly gain since December 2017

* Lead hits seven month peak after stocks fall

* GRAPHIC-2019 asset returns: tmsnrt.rs/2jvdmXl (Updates with closing prices)

By Peter Hobson

LONDON, Feb 28 (Reuters) - Copper prices on Thursday were set for their biggest monthly rise since December 2017 as weak Chinese factory data and concerns over U.S.-China trade talks were offset by falling stockpiles which point to a tight market.

Benchmark copper on the London Metal Exchange (LME) closed flat at $6,509 a tonne. It was up around 5.5 percent in February, its second consecutive monthly gain.

The metal used in power and construction had plunged to a 1-1/2-year low of $5,725 in early January as the trade dispute between Washington and Beijing threatened to accelerate an economic slowdown in China, the biggest metals consumer.

Data on Thursday showed factory activity in China contracted to a three-year low in February, the latest sign of weakening growth.

President Donald Trump’s chief trade negotiator, meanwhile, said much work was still needed to nail down a U.S.-China trade agreement and the United States would need to maintain the threat of tariffs on Chinese goods for years.

Yet traders remain optimistic that Chinese demand will hold up and market fundamentals will tighten over the coming months, BMO analyst Colin Hamilton said, predicting prices around $7,000 by mid-year.

U.S. GROWTH: The U.S. economy slowed less than expected in the fourth quarter, leaving 2018 growth just shy of the Trump administration’s 3 percent annual target.

COPPER STOCKS: Supply of copper looked tight after on-warrant stocks available to the market in LME-registered warehouses fell to 21,600 tonnes from around 300,000 tonnes a year ago. They are now the lowest since 2005. MCUSTX-TOTAL

COPPER SPREAD: Cash copper has also risen to a premium of $46.50 a tonne over the three-month contract from a discount around $20 a tonne earlier in February. CMCU0-3

COLUMN: China’s strong imports help explain low LME metal stocks, writes Reuters columnist Andy Home.

POSITIONING: Speculative investors are betting on higher prices. Their net long in LME copper was at 9.4 percent of open contracts as of Tuesday’s close and the highest since January 2018, brokers Marex Spectron said.

LEAD: Battery metal lead closed up 0.7 percent at $2,151 after hitting its highest since late July 2018. On-warrant LME lead inventories MPBSTX-TOTAL slid 42 percent this week to 44,150 tonnes.

OTHER METALS: LME aluminium ended down 0.6 percent at $1,911 a tonne, zinc finished 1.2 percent higher at $2,778 after touching its highest since Feb. 5, tin closed up 0.6 percent at $21,650 and nickel ended flat at $13,050.

Additional reporting by Tom Daly in Beijing and Eric Onstad in London; Editing by Mark Potter and David Evans

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