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METALS-Copper hits week high as dollar drifts, Germany in focus

Susan Thomas
Friday, 22 Nov 2013 | 11:08 AM ET

* Global copper market swings to surplus - ICSG

* Nickel falls more than 2 pct on week as supply mounts

* German business morale rises, Q3 growth moderate

LONDON, Nov 22 (Reuters) - Copper hit a one-week high on Friday, lifted by a weaker dollar against the euro, signs of economic growth in Germany and a temporary supply shortfall after a typhoon-hit Philippine smelter halted some shipments.

The metal also got a boost after Atlanta Federal Reserve President Dennis Lockhart told CNBC on Friday that even after the U.S. central bank starts winding down its stimulus, monetary policy is likely to be very accommodative for some time.

Copper is recovering from three-month lows touched on Tuesday, underpinned by a fall in physical supply in Asia and expectations China's economic reforms will support an improvement in global demand next year.

Three-month copper on the London Metal Exchange was up 0.48 percent at $7,053.50 a tonne at 1543 GMT, from a $7,020 close on Thursday.

"I think it is mainly due to a slightly weaker dollar and positive economic data out of Europe, and especially out of Germany," Commerzbank analyst Daniel Briesemann said.

German business morale surged to its strongest in a year and a half in November, suggesting Europe's largest economy is gaining steam into the end of the year after growing by a modest 0.3 percent in the third quarter.

The Munich-based Ifo think-tank said its business climate index, based on a monthly survey of 7,000 firms, rose to 109.3, beating the consensus forecast in a Reuters poll for a rise to 107.7 and surpassing the highest estimate for 108.5.

The rise in the index, which had fallen in October, sent the euro higher against the dollar. A softer U.S. currency makes it less expensive for foreign investors to buy dollar-priced commodities, thus supporting prices.

While copper has recovered from a three-month low touched on Tuesday at $6,910 a tonne, it is still down more than 10 percent for the year.

"I think the risk is clearly on the downside, and I don't know what will lift copper significantly at the moment because sentiment out there is still negative," Briesemann said. "We are still lacking convincing data ... and I wouldn't be surprised to see it back below $7,000."

While U.S. factory output rebounded this month, business activity across the euro zone and at China's manufacturers slowed, surveys showed on Thursday.

The global copper market also swung into a surplus in August, after three straight months of a shortfall, mostly due to higher production, data from the International Copper Study Group showed.

In the meantime, a disruption in copper supply helped prop up the price after a typhoon-hit Philippine smelter delayed deliveries. Chinese importers face a shortfall of about 30,000 tonnes this month and next, traders said on Thursday.

Copper futures also reflected a shortfall in supply of the metal, with cash copper swinging to a $4 premium against the benchmark contract on Thursday from a discount of $14 at the start of the week, underpinning prices.

China is giving priority to infrastructure development in smaller cities as part of its reforms, which will help eventually fuel demand for copper, which is used in power cables, construction and white goods.

In other metals traded, LME three-month aluminium was up 0.10 percent at $1,785.25 a tonne, while nickel was up 0.37 percent at $13,480 a tonne.

The global nickel market surplus ballooned to 127,100 tonnes in the first nine months of the year, more than double the surplus in the same period last year, a bulletin from International Nickel Study Group showed.

In aluminium, top producer Russia's Rusal expects to benefit from a cost-cutting plan and a more balanced global aluminium market in the fourth quarter, its co-owner and Chief Executive Oleg Deripaska said.

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