METALS-Copper falls after China factory data hits recovery hopes
* Copper slides 3.2 percent, erasing week's gains
* HSBC China flash PMI falls to seven-month low of 49.6
By Eric Onstad and Rosalba O'Brien
LONDON, May 23 (Reuters) - Copper slid over 3 percent on Thursday after a weak Chinese manufacturing activity survey, adding to fears that recovery in the top metals consumer has stalled and wiping out copper price gains over the last week.
Benchmark three-month copper on the London Metal Exchange closed at $7,300 a tonne, off a session low of $7,215. It closed at $7,474 on Wednesday.
China's new orders fell, a preliminary survey of purchasing managers showed, adding to concerns that a recovery in the world's second-largest economy is sputtering.
China is the world's biggest consumer of industrial metals, taking 40 percent of the global supply of refined copper.
"The big news this morning was the Chinese PMI and really I think that's what's turned sentiment because yesterday things were looking a lot stronger for copper," said Barclays analyst Gayle Berry.
Copper hit a six-week high of $7,534 in the previous session, bolstered by a continued production outage at Grasberg in Indonesia, the world's second-largest copper mine.
Operations have been suspended at Grasberg since May 15, after a tunnel collapse killed 28 workers. A trade union official said on Thursday all investigations into the incident at Freeport McMoRan's mine must be completed before workers return.
India's top copper smelter, run by Sterlite Industries , has also been shut since the end of March, with a court hearing into complaints of polluting emissions due to resume on Monday.
Those outages would contribute to a constricted supply that meant the LME copper market was unlikely to revisit 18-month lows hit early in the month of just below $6,800 a tonne, analysts said.
"We still suspect that the serious mining outages will lend the market a measure of support and do not see a retest of the recent lows for the time being," said Edward Meir of INTL FCStone.
U.S. data on Thursday that showed jobless claims dropping more than expected last week also failed to lift metals prices.
Hints from the U.S. Federal Reserve chief on Wednesday that the bank would end its bond-buying program earlier than expected weighed on markets, though, as such a move would erode liquidity and investment capital available for metals.
Earlier on Thursday, investment bank Goldman Sachs gave up on a previous bullish recommendation and advised clients to cut losses.
Goldman had told clients to go long in copper on March 1, forecasting a bounce back to around $8,000 a tonne, but instead the market tumbled, and the bank said the trade should be closed with losses of $236 a tonne or 3.1 percent.
Other industrial metals also fell, with aluminium closing at $1,849 from $1,884 per tonne, nickel at $14,940 from $15,170, tin at $20,950 from $21,475, lead at $2,045 from $2,057, and zinc at $1,856 from $1,881.
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