* Speculators add to long LME copper position
* Zinc prices seen higher as fundamentals, chart improve-Triland
* Coming Up: ECB interest rate announcement at 1145 GMT (Updates prices)
By Melanie Burton
MELBOURNE, June 2 (Reuters) - London copper held above one-week lows on Thursday after patchy U.S. factory growth in May dragged down the dollar, while London zinc jumped to a 10-month high as investors bid up prices on signs a long awaited supply crunch has begun.
U.S. manufacturing grew for a third straight month in May, but factories appeared to be taking in fewer deliveries from their suppliers, which could hamper production in the months ahead.
Three-month copper on the London Metal Exchange had edged down by 0.3 percent to $4,603 a tonne by 0802 GMT, after falling 1.1 percent in the previous session when prices touched the weakest since May 24 at $4,565.50 a tonne. A break of support at $4,540 a tonne would open the way to prices seen last in February.
Shanghai Futures Exchange copper slipped 0.6 percent to 35,280 yuan ($5,364) a tonne.
“Copper and aluminium prices failed to sustain their April gains despite the large boost to Chinese credit growth early this year,” said Societe Generale in a research note.
“The latest data releases on Chinese trade, production, investment and credit suggest that the economy’s burst of life is unlikely to last. Copper and aluminium remain oversupplied, and we expect copper and aluminium prices to significantly underperform the smaller base metals over the coming months.”
Soc Gen said it expected the copper price to bottom out during Q1 2017 at around $4,200.
Still, investors are turning positive on copper in the near term. The total net long position of funds trading copper on the LME rose to 25,404 lots on May 27 from 24,919 lots the previous Friday, an LME report showed.
Shanghai zinc rallied as much as 4 percent, in line with solid gains in LME zinc which punched through the $2,000 mark for the first time since last July, on signs that tighter mine supply is starting to curb production of refined metal.
LME zinc hit its highest at $2,004 since July 23 in heavy trade, as smelters paid more to treat zinc concentrate, a sign of dwindling mine supply.
Considering zinc’s brightening fundamentals and its chart picture, zinc’s upward move looks set to continue, said Triland in a note. “Those multi-week highs should trigger further buying appetite from the investment community.”
In news, China’s new home prices rose further in May, while global manufacturing activity remained stuck in a rut last month.
The LME is expanding its new electronic method of tracking metal in warehouses, as the system launched in April gains early traction among some western and Chinese banks, as well as warehousing and metals firms looking to cut risks.
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 ($1 = 6.5767 Chinese yuan) (Reporting by Melanie Burton; Editing by Richard Pullin and Subhranshu Sahu)