July 6, 2020 / 10:02 AM / in a month

METALS-China demand optimism drives copper to five-month high

* China's copper smelters cut concentrate processing fees

* Focus on Chile's copper mining industry (Updates prices)

By Pratima Desai

LONDON, July 6 (Reuters) - Copper prices scaled five-month highs on Monday, boosted by optimism about demand in top consumer China and concerns about the spread of COVID-19 in Chile, the world's largest producer.

Benchmark copper on the London Metal Exchange was up 1.8% at $6,127 a tonne at 1558 GMT. Prices of the metal used widely in the power and construction industries earlier touched $6,143 a tonne, the highest since Jan. 22.

"Copper is most exposed to China, the country that came out of the crisis first, where we think real demand will recover to last year's levels," said Julius Baer analyst Carsten Menke.

"The market seems to think Chile will close mines to contain the coronavirus. That risk should not be underestimated, but Chile's economy is geared toward copper, it is dependent on revenues from the mining sector."

DEMAND: Chinese demand can be gauged from its imports of copper at 436,030 tonnes in May, down 5.5% from April, but up more than 20% year on year.

"Although demand has picked up in China, the recovery in other Western markets has been more muted," Edward Meir, analyst at ED&F Man Capital Markets said in a note.

"Moreover, mine supply disruptions are still not tipping any of the complexes we follow into deficit, as demand retrenchment has more than offset any issues having to do with supply."

CONCENTRATE: Worries about copper concentrate supply are behind China's smelters cutting their treatment and refining charges in the third quarter by 3.6% from a year ago to $53 a tonne and 5.3 cents a lb respectively.

CHILE: Chile's copper industry is nearing a tipping point as the coronavirus explodes across the country, mine workers and analysts say, laying bare the hidden costs of policies that have until now salvaged its output of the red metal.

OTHER METALS: Aluminium was up 1.2% at $1,634 a tonne, zinc rose 1.4% to $2,055, lead added 1% to $1,798, tin gained 1.4% to $17,070 and nickel climbed 2.7% to $13,345. (Reporting by Pratima Desai; editing by Jane Merriman and David Evans)

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