METALS-London copper dips on dollar, increasing supply

* Dollar sets 13-month high, euro struggles

* U.S. durable goods data lifts prospects for metal demand

* Aluminum premiums may be set at record levels on demand revival

(Updates prices, adds comment, changes dateline from SYDNEY)

LONDON, Aug 27 (Reuters) - Copper fell on Wednesday as a firm dollar and the prospect of increasing supply of the metal offset growing confidence in U.S. economic growth.

Data on Tuesday showed orders for long-lasting U.S. manufactured goods posted their biggest gain on record in July, helped by strong overseas demand for aircraft. The underlying trend remained firm, pointing to brisk economic growth.

The figures bolstered the dollar, which hit a 13-month peak against a basket of currencies on Wednesday.

"Strength in the dollar is certainly weighing on the copper price, which is making it expensive for traders to buy the metal," Naeem Aslam, chief market analyst at Ava Trade, said.

"Having said that, it is important that we emphasize the latest U.S. durable goods data, as it gives us a clear idea about the demand for metal."

Industrial metals are priced in dollars, and become more expensive for investors holding other currencies when the dollar rises.

Three-month copper on the London Metal Exchange edged down 0.2 percent to $7,040 a tonne by 1014 GMT. On Tuesday it climbed to $7,108.75 a tonne, its highest since Aug. 5, before ending with a small loss on the day.

The most active October copper contract on the Shanghai Futures Exchange slipped 0.6 percent to 50,300 yuan($8,185) a tonne.

Gains have been capped by expectations of higher supply, fueled this month when U.S.-based copper miner Freeport-McMoRan Inc. began shipping concentrate from Indonesia after a seven-month halt.

Newmont Mining Corp may be on the same path: it has withdrawn an international arbitration filing against the Indonesian government, indicating a possible breakthrough in a related dispute that has halted its exports.

In other metals, quarterly premiums paid on top of the LME cash price for aluminum may be set at record levels as a revival in global demand bumps up against supply constraints caused partly by bottlenecks at warehouses.

Rio Tinto has offered Japanese buyers aluminum at a record premium of $420 per tonne for October-December shipments, up 3-5 percent from the previous quarter, four sources involved in talks said on Tuesday.

However, that was down from Rusal's opening gambit of $460. Russia's United Company Rusal Plc returned to profit in the June quarter for the first time in five quarters, thanks to higher aluminum prices, cost cuts and smelter closures.

LME aluminum hit its highest in 20 months on Tuesday at $2,100 a tonne, easing to $2,085 on Wednesday.


Three month LME copper

Most active ShFE copper

Three month LME aluminum

Most active ShFE aluminum

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 US dollar = 6.1455 Chinese yuan)

(Additional reporting by Melanie Burton in SYDNEY; editing by Keiron Henderson)