METALS-Copper tests key $10,000 mark on strong China manufacturing data

By Pratima Desai

LONDON, July 1 (Reuters) - Copper prices hit three-month highs on Tuesday with growing optimism about demand for the metal, used in power and construction, in top consumer China after the country's stronger manufacturing data.

Benchmark copper CMCU3 on the London Metal Exchange (LME) was up 0.6% at $9,929 a metric ton by 1600 GMT.

Traders said copper picked up momentum after U.S. markets opened, driving prices to the key psychological mark of $10,000, the highest since March 26.

China's factory activity expanded in June, supported by an increase in new orders that lifted production, after contracting the previous month, a private sector survey showed.

Low inventories were also helping. In LME-registered warehouses copper stocks MCUSTX-TOTAL at 91,250 tons have dropped 66% since the middle of February.

In warehouses monitored by the Shanghai Futures Exchange (SHFE), copper inventories at 81,550 tons CU-STX-SGH have also fallen 66% since early March.

"Overall availability remains tight across both exchanges, reinforcing strong underlying demand and fuelling backwardation," analysts Benchmark Mineral Intelligence said in an note.

Backwardation refers to the premium for nearby contracts over those with longer maturities.

The premium for the LME's cash copper contracts over the three-month forward CMCU0-3 hit $319 a ton last week, its highest since October 22.

It has since slipped to around $134 on expectations of large copper deliveries. LME data shows 1,500 tons were delivered to its warehouses in the South Korean port of Gwangyang on Monday MCU-KRKAN-TOT.

However, cancelled warrants or metal earmarked for delivery indicate another 31,975 tons are due to leave the LME system.

LME stocks have been depleted by the threat of tariffs on U.S. copper imports by President Donald Trump which have pushed up prices on COMEX, creating a premium above LME prices.

Meanwhile, the U.S. dollar gained after data showed a better-than-expected increase in labour market demand, indicating the Federal Reserve will likely take its time to cut interest rates. A stronger U.S. currency makes dollar-priced metals more expensive for holders of other currencies. FRX/

In other metals, aluminium CMAL3 was steady at $2,598 a ton, zinc CMZN3 retreated 1.3% to $2,714, lead CMPB3 dipped 0.3% to $2,037.50, tin CMSN3 fell 0.5% to $33,550 and nickel CMNI3 slipped 0.1% to $15,185.

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