* GRAPHIC-2019 asset returns: tmsnrt.rs/2jvdmXl (Updates with closing prices, rare earths update)
By Zandi Shabalala
LONDON, June 4 (Reuters) - Copper prices hovered near a five-month low on Tuesday as an escalation of the U.S.-China trade war reinforced concern about demand for industrial metals while the weaker dollar provided some suppport.
China on Tuesday warned that its companies operating in the United States could face harassment from U.S. law enforcement agencies.
It also rebuffed U.S. criticism of a trade white paper as “singing the same old tune”.
“There are fears that the U.S-China trade war will dampen the global economy and that it might fall into recession,” said Commerzbank analyst Daniel Briesemann.
“These macro factors are in play even if fundamentals may be pointing to higher prices.”
Benchmark copper on the London Metal Exchange (LME) ended 0.8% higher at $5,878 a tonne but was still close to the Jan. 4 low of $5,801 touched on Monday.
TRADE WAR: China will consider strengthening controls on exports of rare earths - 17 chemical elements used in high-tech consumer electronics and military equipment - to protect and better use such a “strategic resource”, the state planner said on Tuesday.
The world’s second-largest economy is the biggest exporter of the elements and moves to limit exports would raise tensions with the United States, where China is the dominant supplier.
DEMAND: China accounts for nearly half of global copper consumption estimated at 24 million tonnes. The United States accounts for about 8 percent.
DOLLAR: Expectations that the U.S. Federal Reserve will soon cut interest rates weighed on the U.S. currency, a weakening of which makes dollar-denominated commodities cheaper for holders of other currencies, potentially boosting demand.
INVENTORIES: Copper stocks in LME-registered warehouses MCUSTX-TOTAL fell slightly to 211,775 tones but have jumped by 67% so far this year. That increase has led to a widening of the discount for cash copper against the three-month contract to $26 a tonne. CMCU0-3
SPREADS: The tightness in the LME market has kept cash zinc at a premium of about $140 over the three-month contract. CMZN0-3
ZINC INVENTORIES: Zinc stocks registered with SfHE rose 5.4% to 59,351 tonnes, according to a weekly tally on Friday. ZN-STX-SGH
But inventories are still down 54% from a 2019 high of 124,038 tonnes in March.
Stocks in LME-monitored warehouses sit at 100,375 tonnes, and are down about 22% so far this year. MZNSTX-TOTAL
PRICES: Zinc touched a January low of $2,448 a tonne before closing 0.3% up at $2,475.50. Aluminium finished 0.5% up at $1,786, lead jumped 2% to $1,846 and tin slipped 0.3% to $19,090.
Nickel was down 0.5% in electronic trading to stand at $11,815 a tonne at 1600 GMT.
Additional reporting by Mai Nguyen Editing by Susan Fenton and David Goodman