Union at Candelaria copper mine rejects Lundin Mining contract

* LME on-warrant aluminium stocks slide to lowest since April

* Metals also supported by weaker dollar index (Updates with official prices)

LONDON, Oct 6 (Reuters) – Copper edged higher on Tuesday, lifted by concern over possible strike action in top producer Chile, though prices remained vulnerable to higher inventories and signs of weakening demand.

A labour union at the Candelaria copper mine in Chile rejected a contract offer from Canada’s Lundin Mining, union officials said on Monday, raising the possibility of a strike.

Mines with combined annual production of about 2.8 million tonnes have labour negotiations in the fourth quarter, UBS analyst Daniel Major said in a note. These include Escondida, the world’s largest copper mine, he added.

“The wage negotiations and potential strike action is providing underlying support for copper. But copper has really not been able to build on Friday’s gains … so copper remains fragile,” said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen.

Three-month copper on the London Metal Exchange (LME) was virtually unchanged in official trading at $6,528 a tonne but was up 0.3% at $6,545 by 1215 GMT after volatile moves last week. The price slid 4.3% to a seven-week low on Thursday and rebounded 2.6% on Friday.

Also supporting the market was U.S. President Donald Trump’s return to the White House after being discharged from hospital, as well as hopes that a new U.S. stimulus package can be agreed.

* LME aluminium advanced 0.4% to $1,783 a tonne in official activity after on-warrant LME inventories MALSTX-TOTAL dropped by nearly 70,000 tonnes to 1,126,600 tonnes, the lowest level since April 9.

* The discount on LME cash copper against the three-month contract CMCU0-3 stretched to $14.25 a tonne, its biggest since June. 22, indicating healthy nearby supplies. LME copper inventories MCUSTX-TOTAL have doubled over the past two weeks.

* The dollar index eased, making metals priced in dollars cheaper for buyers using other currencies.

* Zinc gained 1.1% to $2,351.50 a tonne, lead climbed 1.3% to $1,778.50, nickel added 0.3% to $14,683 and tin was also up 0.3% at $18,120.