* LME aluminium hits six-year low
* Dollar index drops after weak U.S. data
* El Nino may extend nickel mining season in Philippines
* Coming up: China July PMIs on Aug. 1 (Updates with closing prices)
By Eric Onstad
LONDON, July 31 (Reuters) - Copper prices fell on Friday on persistent worries about demand in top consumer China, but losses were muted after weak U.S. data prompted a slide in the dollar.
The metal marked up its biggest monthly loss since January, while aluminium touched a six-year low.
Volatility hit the market as traders squared their books ahead of the month-end and Chinese factory data due over the weekend.
Three-month copper on the London Metal Exchange closed down 0.6 percent at $5,230 tonne, after sliding as much as 1 percent in the morning and then bouncing briefly into positive territory following the U.S. data.
“Copper rebounded after the dollar weakened and shorts were taking profit at the month-end,” said Richard Fu, director of Asian commodities trading for Societe Generale Newedge in London.
The dollar slid, making metals cheaper for buyers in other currencies, after data showed U.S. labour costs in the second quarter rose by the least in the history of the index. This put a dent in the argument for the U.S. Federal Reserve to raise interest rates in September.
LME copper shed 9 percent in July, its weakest showing since January and the second-biggest drop since 2012.
Investors remained on edge about demand in China, after an official warned that risks from a slowing economy must not morph into social risks and as the volatile Chinese stock market fell again.
“I think in all the metals we are in an extended, excessive downward move, which may continue for some time,” said Eugen Weinberg, head of commodity research at Commerzbank in Frankfurt.
“It’s very difficult to call a bottom, especially given the insecurity and high volatility on Chinese equity markets and the somewhat stronger dollar in recent weeks.”
Growth in China’s manufacturing sector likely steadied in July but remained at a subdued pace, a Reuters poll showed, fuelling hopes that a slowdown in the world’s second-largest economy may be gradually bottoming out.
Aluminium ended 1.5 percent lower at $1,618 a tonne, the weakest in six years, amid oversupply.
Nickel gained 0.2 percent to finish at $11,045 a tonne despite indications that weather event El Nino may ensure steady supplies from the Philippines.
Tin closed up 0.7 percent at $16,300 a tonne. Prices surged nearly 18 percent this month on prospects of tighter supply, as smelters from top exporter Indonesia face export delays ahead of new regulation from August.
Zinc slid 1.8 percent to finish at $1,916 a tonne while lead fell 0.6 percent to $1,702.
Three month LME copper
Most active ShFE copper
Three month LME aluminium
Most active ShFE aluminium
Three month LME zinc
Most active ShFE zinc
Three month LME lead
Most active ShFE lead
Three month LME nickel
Most active ShFE nickel
Three month LME tin
Most active ShFE tin (Additional reporting by Melanie Burton in Melbourne; Editing by Dale Hudson and William Hardy)