METALS-Copper pulls back, weak dollar limits slide
* Dollar falls on U.S. government troubles
* Fears grow over U.S. debt ceiling
* BHP Billiton sees China GDP growth moderating
(Recasts, updates prices, adds comment, report)
LONDON, Oct 3 (Reuters) - Copper fell on Thursday as longer-term uncertainty over surpluses made itself felt, but the metal's losses were limited by dollar weakness due to U.S. government turmoil.
The U.S. government spending deadline is rapidly merging with a higher-stakes battle due mid-October over the government's borrowing power. The Treasury has said the United States will exhaust its borrowing authority by Oct. 17.
Benchmark three-month copper on the London Metal Exchange eased 0.5 percent to $7,245 per tonne in midday rings, as the dollar struggled against a basket of currencies.
Copper has lost almost 9 percent this year against a growing surplus. The International Copper Study Group forecast a 2013 surplus of around 390,000 metric tonnes on Wednesday, set to increase further next year.
"Copper's fundamentals are deteriorating," said Stephen Briggs, strategist for BNP Paribas.
In the meantime however the U.S. shutdown and sluggish private sector job data dragged the U.S. currency to an eight-month low on Wednesday. A weaker dollar against other currencies makes dollar-priced metals cheaper for non-U.S. investors.
"The government impasse in the U.S. effectively has weakened the dollar and that's supporting metal prices," said Robin Bhar, metals analyst at Societe Generale.
President Barack Obama failed to break the deadlock after meeting Republican and Democratic leaders in Congress on Wednesday. With no end in sight an unprecedented default by the United States approaches.
"The worst outcome that the markets fear is that the U.S. will default on its debt," said Bhar. "I can only think that in that situation, regardless of what the dollar does, you'll see commodities and financial markets just slump."
WEAKNESS HERE TO STAY?
Copper trading has been thin in the past week with China on national holiday until next Tuesday, but analysts warned against any bullishness when they return for trading.
China's economy is not recovering as quickly as many are hoping. Manufacturing growth fell below expectations earlier this week, although its services sector grew at its fastest pace in six months.
And while China accounts for the bulk of global copper demand, the United States, Europe and Japan make up 30 percent and the outlook for their economies remains uncertain.
"Given this situation, I think a more reasonable price for copper should be below $7,000," said Helen Lau, senior metals analyst at UOB-Kay Hian Securities in Hong Kong.
Copper has lost more than 8 percent this year, as a market surplus continues and demand looks to ease.
BHP Billiton , the world's top miner, said it expects China's economic growth to moderate, seeing 7-8 percent expansion in the short to medium term with the share of manufacturing and investment decreasing over time.
In other metals, benchmark aluminium traded down 0.3 percent to $1,832 per tonne in rings. Zinc was down 0.6 percent at $1,887 from a previous close of $1,888, while lead traded flat at $2,075 and tin rose 0.2 pct to $22,865.
Nickel was untraded in rings but its last bid was down 0.7 percent to $13,690.
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
Three month LME tin
(Additional reporting by Manolo Serapio Jr in Singapore; editing by Keiron Henderson and James Jukwey)