METALS-Copper rises as U.S. opens, remains wary
* China returns from holiday on Tuesday Oct. 8
* Possible shutdown of Indonesia's Grasberg copper mine
* Nickel surplus grows
* Industry event LME week starts on Monday in London
(Updates prices, adds detail)
LONDON, Oct 4 (Reuters) - Copper rose on Friday as U.S. markets opened, although investors were wary as they awaited the return from holiday of top consumer China and eyed the prospect of debt default as the U.S. government shutdown appeared likely to drag on for another week.
The three-month benchmark contract rose 1.1 percent at $7,264 a tonne by 1226 GMT on the London Metal Exchange (LME) in thin volumes. It did not trade in official midday rings, but was last bid at $7,180.
The stronger prices were likely due to investors buying back short positions ahead of the weekend and before the LME Week industry event in London which begins Monday, a trader said.
Volumes of copper have been thin and more volatile in China's absence.
"For us the market you have to look at is China. That is the most important market in terms of base metals demand," said Nic Brown, head of commodities research at Natixis.
"We think the situation in China is getting better."
Meanwhile the dollar stayed near an eight-month low, weighed down by the U.S. deadlock, although for most a default remains unthinkable.
Oct. 17 is the date Congress must raise the U.S. borrowing authority or risk default, and members of Congress now expect it to be the flashpoint for a clash over the budget. 1/8ID:nL1N0HT0SX
"The market is taking the view that shutting the government down is one thing, but they're unlikely to go as far as triggering a default," said Brown.
A weakening dollar supports metal prices, as it is cheaper for importing nations to buy dollar-priced commodities with their currency.
Russian company Norilsk earlier predicted its Russian nickel and copper output would rise by up to 5 percent by 2016.
The world's biggest nickel and palladium producer added that it would tighten its capital expenditure and sell off less profitable mines to combat a steep price plunge this year.
The International Nickel Study Group on Wednesday predicted an all-time high surplus of 140,000 tonnes for 2013. LME stocks have increased by over 114 percent this year.
"The extent of the surpluses only becomes clear when viewed relative to the small size of the nickel market with annual production of just under 2 million tonnes," said Commerzbank in a note, adding that despite the surpluses, nickel's costly production process should maintain prices.
Investors are also watching Indonesia, home to Grasberg, the world's second-biggest copper mine, which could be forced to shut down next year over the country's ban on unprocessed mineral ores.
Indonesia has attempted to increase influence and profits and encourage local investment from metals companies, but the market remains unconvinced.
Next Monday sees the start of industry LME week, where term deals for 2014 in copper are expected to be hammered out.
Nickel was up 0.9 percent in rings to $13,640. Benchmark aluminium traded up 0.25 percent to $1,832 a tonne, and zinc rose 0.05 percent at $1,869.
Lead was untraded in rings but was last bid down 0.2 percent to $2,056, and tin was bid up 1.1 percent to $23,000.
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
(Editing by Keiron Henderson)