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METALS-Copper steady as China, surplus expectations offset dollar

Susan Thomas and Melanie Burton
Monday, 18 Nov 2013 | 6:01 AM ET

* Copper smelter shutdown, China output underpin prices

* Dollar falls against growth-linked currencies after Beijing reforms

* Jiangxi Copper, Freeport agree on higher treatment charges

(Updates prices, adds LONDON to dateline)

LONDON/SINGAPORE, Nov 18 (Reuters) - Copper was steady near three-month lows on Monday as expectations of a growing surplus of metal and disappointment over a lack of immediate measures to boost commodities in China's reform package offset a softer dollar.

Three-month copper on the London Metal Exchange was $6,995 a tonne by 1043 GMT from $7,010 at the close on Friday. It fell to a three-month low of $6,940 on Thursday and was the worst performer in the base metals complex for the week.

Beijing unwrapped its boldest set of economic and social reforms in nearly three decades on Friday, relaxing its one-child policy and further freeing up markets in order to put the world's No.2 economy on a more stable footing. The reforms may take years, however.

"At the end of the day, we knew that the reforms would be positive, but I tend to think the markets wanted more concrete ideas. They didn't get them, therefore markets sold off," said Jonathan Barratt, chief executive of commodity research firm Barratt's Bulletin.

The dollar and the yen fell on Monday against growth-linked currencies which drew support from higher stock markets as investors cheered prospects of more economic reform in China.

A weaker U.S. currency makes it less expensive for foreign investors to purchase dollar-priced commodities, thus supporting prices.

But for copper, expectations of rising mine supply weighed on prices.

This was hammered home with China's Jiangxi Copper and Freeport McMoRan agreeing to treatment and refining charges (TC/RCs) of $92 per tonne and 9.2 cents per pound for copper concentrate shipments in 2014, up 31 percent from 2013.

Miners pay TC/RCs to smelters to convert concentrate into refined metal, with charges deducted from the sale price. The charges typically rise when supply increases.

Analysts polled by Reuters expect the copper market to post a surplus of 182,000 tonnes this year, up from a previous forecast of 153,000 tonnes before ballooning to 328,000 tonnes in 2014.

Hedge funds and money managers turned copper into a net short for the week ended Nov. 12, a report by the Commodity Futures Trading Commission showed.

Adding some support to copper prices was a shutdown of Glencore Xstrata's PASAR copper smelter and refinery in the Philippines as it sustained heavy structural damage after Typhoon Haiyan battered the country and questions over China's production, Standard Bank said in a note.

China's refined copper output may have been inflated by more than 15 percent this year, smelter sources said.

"Rather than the start of a capitulation, we believe that prices are at worst settling into a new sideways trading range, with the risk in our view still lying to the upside as we head towards year-end," Standard Bank added.

PRICES

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

($1 = 6.0922 Chinese yuan)

(Editing by David Evans)

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