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METALS-London copper heads for biggest weekly drop since early May

(Updates prices) MELBOURNE, June 16 (Reuters) - London copper edged up on Friday but was still eyeing its biggest weekly drop since early May as markets priced in a higher U.S. interest rate environment that would support the dollar.

* LME COPPER: London Metal Exchange copper rose by half a percent to $5,668 a tonne, by 0700 GMT, shedding losses from the previous session. Copper is still down around 2 percent for the week.

* ShFE COPPER: Shanghai Futures Exchange copper closed slightly weaker at 45,490 yuan ($6,677.53) a tonne.

* NICKEL: In other metals, nickel edged up, trailing steel, after China's government said it was beating its targets for capacity closure.

* STEEL: Chinese steel futures rose sharply for a third straight session, supported by government efforts to tackle a glut, even as the outlook for demand in the world's top steel consumer may not be too promising, particularly from its property sector.

* U.S. JOBLESS: The number of Americans filing for unemployment benefits fell more than expected last week, pointing to shrinking labor market slack that could allow the Federal Reserve to raise interest rates again this year despite moderate inflation growth.

* NEW CHAIRMAN: Mining giant BHP on Friday named well-regarded Australian packaging executive Ken MacKenzie as its next chairman, handing him the challenge of guiding the company amid calls for change.

* EXCHANGE EXPANSION: CME says the New York Mercantile Exchange Inc. and Commodity Exchange Inc. plans to expand the location for the storage and delivery of zinc delivered against the Zinc Futures contract to Europe and Asia.

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BASE METALS PRICES 0742 GMT Three month LME copper 5659.5 Most active ShFE copper 45660 Three month LME 1872.5

aluminum

Most active ShFE 13600

aluminum

Three month LME zinc 2531 Most active ShFE zinc 21150 Three month LME lead 2109 Most active ShFE lead 17295 Three month LME nickel 8920 Most active ShFE nickel 73620 Three month LME tin 19425 Most active ShFE tin 145600

BASE METALS ARBITRAGE

LME/SHFE COPPER LMESHFCUc3 455.77 LME/SHFE ALUMINIUM LMESHFALc3 -1274.

72

LME/SHFE ZINC LMESHFZNc3 651.12 LME/SHFE LEAD LMESHFPBc3 -320.8

8

LME/SHFE NICKEL LMESHFNIc3 1981.9

6 ($1 = 6.8124 Chinese yuan)

(Reporting by Melanie Burton and James Regan; Editing by Richard Pullin and Sherry Jacob-Phillips)