* Copper treads water Friday ahead of China PMI * Official China PMI seen barely expanded in May * One worker killed at new collapse at Grasberg mine * Coming Up: Euro zone inflation at 0900 GMT By Manolo Serapio Jr SINGAPORE, May 31 (Reuters) - London copper futures were little changed on Friday as investors adopted caution ahead of a key factory activity report in top consumer China, but are still on track to end May higher after a three-month slide. But news of a fresh tunnel collapse on Friday at the world's second-largest copper mine, in Indonesia, may spur supply concerns and help lift prices later in the global session. China's official Purchasing Managers' Index, due out on Saturday, is likely to show manufacturing activity barely expanded in May, according to a Reuters poll. An initial private-sector PMI survey last week showed a contraction for the first time in seven months, fueling a sell-off in commodities and equities. While prices rebounded this month from the year's lows in April, backed by supply outages and signs of firm demand in top consumer China, a rally has eluded copper amid persistent doubts on the outlook for the global economy. "For a lot of investors, the fundamentals of copper are still not compelling enough to give it a rally that's sustainable," said Sijin Cheng, commodities analyst at Barclays Capital. "People are still trading it as a reflection of their take on the macroeconomic environment which has been very confusing lately." While the recent flash HSBC PMI for China suggested that its recovery could stall, U.S. data has pointed to an economy that has held up reasonably well, but still faces headwinds that could convince the Federal Reserve not to trim its monetary stimulus in the immediate future. Three-month copper on the London Metal Exchange was nearly steady at $7,312.25 a tonne by 0704 GMT. The metal has gained almost 4 percent for the month. One worker was killed after a tunnel collapsed on Friday at Freeport McMoRan Copper and Gold Inc's Indonesia mine, a union official said, calling on miners to stop work. This would be the second deadly accident at the remote Papua complex in just over two weeks after 28 people were killed in another collapse. Freeport said on Wednesday it had resumed some operations at the mine. The suspension of work following the first accident had helped lift copper to a six-week high of $7,533.75 a tonne last week. Also providing support to copper prices is the tighter supply of scrap copper in China which could boost the country's imports of refined copper. The scrap shortage pushed copper premiums to eight-month highs of about 500 yuan ($82) a tonne last week. The premium, or the gap between spot prices of refined copper and the front-month contract on the Shanghai Futures Exchange, last stood at about 200 yuan. The most-traded September copper contract on the Shanghai Futures Exchange rose nearly 1 percent to close at 52,720 yuan a tonne. Base metals prices at 0704 GMT Metal Last Change Pct Move YTD pct chg LME Cu 7312.25 -7.75 -0.11 -7.78 SHFE CU FUT SEP3 52720 500 +0.96 -8.60 HG COPPER JUL3 -- -- -- -- LME Alum 1897.75 -10.25 -0.54 -8.37 SHFE AL FUT SEP3 14840 175 +1.19 -3.29 LME Zinc 1906.00 -6.00 -0.31 -7.63 SHFE ZN FUT SEP3 -- -- -- -- LME Nickel 14837.00 37.00 +0.25 -13.51 LME Lead 2172.50 2.50 +0.12 -7.16 SHFE PB FUT 14185.00 90.00 +0.64 -6.98 LME Tin 20960.00 -140.00 -0.66 -10.43 LME/Shanghai arb^ -407 Shanghai and COMEX contracts show most active months ^ LME 3-month copper in yuan, including 17 pct VAT, minus SHFE third month

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