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METALS-Aluminium drops for third session as stockpiles rise

MANILA, May 18 (Reuters) - London aluminum futures slipped for a third session in a row on Friday as inventories increased, easing worries over a supply shortage in the aftermath of U.S. sanctions on major Russian producer Rusal. On-warrant aluminum stocks in warehouses certified by the London Metal Exchange - inventories that are not earmarked for delivery - surged by 153,075 tonnes or 18 percent on Wednesday, LME data showed on Thursday. <MALSTX-TOTAL> Three-month aluminum on the London Metal Exchange was off 0.6 percent at $2,280 tonne by 0151 GMT, not far above Thursday's two-week low of $2,248.50. "Markets are less worried of a prolonged deficit as Rusal (is) set to boost aluminum exports after the U.S. relaxed its sanctions against Rusal in late April," Commonwealth Bank of Australia analyst Vivek Dhar said in a note. "LME aluminum canceled warrants are now on par with levels before the sanctions were announced, potentially meaning that we could see some stability at these price levels." About two weeks after imposing sanctions on Rusal, the United States last month gave American customers of Russia's biggest aluminum producer more time to comply with sanctions, and said it would consider lifting them if Rusal's major shareholder, Russian tycoon Oleg Deripaska, ceded control of the company.

RUSAL: The shockwaves may have passed but the aluminum market is still structurally stressed by the U.S. action against Deripaska and Rusal. The price explosion after the original April 6 sanctions announcement went into reverse on April 23, but tensions caused by the partial lock-out from the global market of the largest producer outside of China are still evident. COPPER: LME copper dropped 0.3 percent to $6,855.50 a tonne following a two-day gain. In Shanghai, the most-traded July copper contract on the Shanghai Futures Exchange rose 0.3 percent to 51,210 yuan ($8,038) a tonne. MARKETS: The dollar hit a four-month high against the yen, buoyed by a rise in U.S. Treasury yields that suggests a more upbeat outlook for the world's largest economy. Asian stocks edged up. NICKEL DEFICIT: The global nickel market deficit widened to 15,700 tonnes in March from a revised deficit of 6,600 tonnes in the previous month, the International Nickel Study Group said.

JINCHUAN: China's Jinchuan Group International Resources plans to double its African copper and cobalt production in the next two to three years. VEDANTA: Vedanta Resources Plc's Thootukudi copper smelter, one of India's biggest, will remain shut until at least June 6.

DATA AHEAD (GMT)

0600 Germany Producer prices Apr 0600 Germany Wholesale price index Apr 0900 Euro zone Eurostat trade Mar BASE METALS PRICES 0151 GMT Three month LME copper 6855.5 Most active ShFE copper 51210 Three month LME aluminum 2280 Most active ShFE aluminum 14785 Three month LME zinc 3077.5 Most active ShFE zinc 23685 Three month LME lead 2357.5 Most active ShFE lead 19530 Three month LME nickel 14735 Most active ShFE nickel 109640 Three month LME tin 20700 Most active ShFE tin 145120

BASE METALS ARBITRAGE

LME/SHFE COPPER LMESHFCUc3 301.29 LME/SHFE ALUMINIUM LMESHFALc3 -2119.32 LME/SHFE ZINC LMESHFZNc3 388.54 LME/SHFE LEAD LMESHFPBc3 449.42 LME/SHFE NICKEL LMESHFNIc3 -1727.65

($1 = 6.3707 Chinese yuan)

(Reporting by Manolo Serapio Jr.; editing by Richard Pullin)