METALS-Copper up on dollar, strike possibility in Chile

(Updates prices)

LONDON, May 20 (Reuters) - Copper prices rose on Thursday as a softer dollar and worries about a strike in Chile spurred purchases, but plans by top consumer China to manage the supply, demand and prices of commodities capped gains.

Benchmark copper on the London Metal Exchange was up 0.5% at $10,056 a tonne at 1558 GMT. However, prices of the metal used widely in power and construction are down 6% since hitting a record $10,747.50 a tonne earlier in May.

“There’s been some buying on the back of a lower dollar and the possibility of a strike at Escondida (copper mine in Chile),” a copper trader said. “But the rally does seem to have to run out of steam.”

STRIKE: The union representing workers at Chile’s Escondida copper mine, the world’s largest, said on Wednesday it was preparing for a lengthy strike if owner BHP did not reach a “fair and equitable” deal in looming contract talks.

DOLLAR: A lower U.S. currency makes dollar-denominated metals cheaper for holders of other currencies, which could boost demand.

CHILE: Also supporting copper is political uncertainty in top producer Chile and Peru.

An overhaul of Chile’s market-orientated constitution is underway and the country is debating whether to increase royalties on miners.

Peru, the No. 2 producer, is heading for a polarised June presidential election with a little-known socialist leading in the polls who wants to redistribute mining wealth.

CHINA: The world’s top metal consumer said on Wednesday it will strengthen its management of the supply and demand of commodities to curb “unreasonable” increases in prices and prevent them being passed on to consumers.

“Concern about the crackdown in China is one of drivers behind copper’s retreat (since the early May high),” said Tom Mulqueen, analyst at Amalgamated Metal Trading.

OTHER METALS: Aluminium was down 0.6% at $2,401, zinc rose 0.9% to $2,965, lead added 2% to $2,217, tin climbed 0.1% to $29,655 and nickel slipped 1% to $17,150. (Reporting by Pratima Desai; editing by Emelia Sithole-Matarise, Kirsten Donovan)