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METALS-Copper price rises as wage talks start at world's largest mine

* LME/ShFE arb: (Updates with closing prices)

LONDON, June 4 (Reuters) - Copper prices rose on Monday, helped by a weaker dollar and the potential for supply problems as wage talks began at the world’s largest copper mine.

The union at BHP’s Escondida mine in Chile said on Friday that it had begun negotiations with a proposal that includes a bonus of about $34,000 per worker.

That stirred memories of failed talks last year, which led to a 44-day strike and pushed copper prices sharply higher.

“The risk of an impasse is very high,” said ETF Securities analyst Nitesh Shah.

Any interruption at Escondida would come on top of the closure of India’s second-largest smelter after environmental protests.

It could tip the market into deficit. The International Copper Study Group sees the 24 million-tonne-a-year copper market with a 43,000 tonne surplus this year and a deficit of 331,000 tonnes in 2019.

“Copper is likely to continue to trade higher,” Shah said.

COPPER: Benchmark copper on the London Metal Exchange (LME) closed 1.2 percent up at $6,975 a tonne after hitting $6,992, its highest since May 22.

TECHNICALS: Copper has been stuck in a range of about $7,300 to $6,600 since hitting a four-year high in December. On Monday it broke above its 100-day moving average and downtrend line from its April high, improving its technical picture, but it faces resistance at the psychologically important $7,000 mark.

SPECULATORS: Positioning by speculative investors in LME copper was largely neutral, brokers at Marex Spectron said.

SPREAD: The premium of three-month copper over the cash contract MCU0-3 has fallen to $1.75, its lowest since March 2017, signalling a decrease in nearby supply.

“The spreads tightening is ... likely related to jitters about (the) potential union negotiation in Chile,” one trader said.

PERU COPPER MINE: China’s Chinalco said it had begun a $1.3 billion expansion of its Toromocho mine in Peru, which it said would raise copper output by 45 percent by 2020. China’s official Xinhua news agency said Chinalco aimed to bring annual refined copper output to 300,000 tonnes.

DOLLAR: Industrial metals received some support as a six-week rally in the dollar appeared to stall. A stronger dollar makes metals more expensive for buyers with other currencies.

CHINA DEMAND: China’s economic growth could slow to about 4.5 percent over the medium term, Fitch Ratings said, adding that it expects oil and metals prices to fall by 5-10 percent from its baseline scenario because China is such a large consumer.

OTHER METALS: LME aluminium closed 0.4 percent up at $2,314 a tonne, zinc finished with a 0.7 percent gain at $3,122, nickel rose 0.2 percent to $15,480, lead advanced by 2.7 percent to $2,509 and tin closed 0.8 percent down at $20,575.

Additional reporting by Melanie Burton Editing by Jane Merriman and David Goodman