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METALS-Copper steady as weaker dollar offsets improving supply pipeline

Susan Thomas
Wednesday, 27 Nov 2013 | 8:25 AM ET

* Dollar falls, euro rises after German government deal

* No end in sight to LME aluminium's grind lower -Triland

* Coming up: U.S. durable goods orders at 1330 GMT

LONDON, Nov 27 (Reuters) - Copper was steady on Wednesday as a weaker dollar against the euro offset the impact of an improving supply pipeline of metal and investor caution ahead of U.S. data later in the session.

Three-month copper on the London Metal Exchange was $7,070 a tonne in official rings from $7,065 at the close on Tuesday.

"The release of major U.S. economic data will be the main focus for today's trading session," Myrto Sokou, senior research analyst at Sucden, said.

"The dollar is also getting softer against the euro so that's supportive for the base metals market, specifically for aluminium and copper at the moment, so that's why you're seeing this upside momentum in early trading."

The dollar fell as the euro rose after a deal was struck to form a new German government and more talk emerged of European Central Bank help for struggling firms.

A weaker U.S. currency makes it cheaper for foreign investors to buy dollar-priced commodities, and typically supports prices.

U.S. data scheduled for release on Wednesday includes the October durable goods report, weekly jobless claims, the Chicago purchasing managers index (PMI) and Michigan sentiment survey for November.

The reports will give an indication of the health of the U.S. economy, the world's largest.

Trading volumes in the base metals market were light with the approach of Thursday's Thanksgiving holiday in the United States.

COPPER SURPLUS

Ramped-up output of copper has dimmed the outlook for the metal and eroded its appeal among investors. LME copper is on track for a 2.5-percent drop in November and has lost more than 10 percent so far this year.

Analysts polled by Reuters last month 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.

Highlighting the outlook for increased supply, four companies are working on a bid for Glencore Xstrata's Las Bambas copper mine in Peru, according to several people familiar with the matter.

Las Bambas, one of the largest mines in Xstrata's project portfolio, is due to begin production in 2015. It is expected to produce more than 450,000 tonnes of copper a year in its first five years and 300,000 tonnes a year thereafter.

LME three-month aluminium was $1,768 a tonne in rings - matching the 4-1/2 month low it touched on Monday, burdened by a market glut of the metal. It closed at $1,773 on Tuesday.

"Aluminium's grind to the bottom shows no signs of stopping, and concerns would certainly increase were the year's lows at $1,757 to be broken on a closing basis," broker Triland said in a note.

"We hear that buyer activity is improving in terms of contracts being negotiated and booked for 2014, but they are not looking to fix prices yet."

LME three-month zinc was $1,883.50 a tonne in rings, from $1,886 at the close on Tuesday, lead was $2,090 from $2,096, tin was $22,870 from $22,900, and nickel was $13,470 from $13,450.

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