Copper steadies on dollar, Mideast worries weigh

* Copper sees worst weekly loss since July 2010

* Good copper supply availability hits prices

* Coming Up: Weekly U.S. jobless claims, 1330 GMT

(Recasts, updates prices)

By Silvia Antonioli

LONDON, Feb 24 (Reuters) - Copper steadied on Thursday as the dollar weakened, but concerns that higher oil prices driven by violence in the Middle East could slow economic growth and cripple demand for industrial metals kept prices under pressure.

Three-month copper on the London Metal Exchange traded at $9,425 a tonne in official rings, unchanged from Wednesday's close. The metal, used in power and construction, earlier registered its worst weekly loss since July 2010.

"There are concerns about what is going to happen in Libya and what is going to happen to oil prices," said Standard Bank analyst Leon Westgate.

"Higher oil prices are generally fairly negative on growth and there is a risk of contagion," he said, adding that slower growth would have a negative impact on demand for industrial metals.

Brent crude oil jumped to its highest since August 2008 on concern bloody unrest that has cut more than a quarter of OPEC-member Libya's output could spread to other producers including top exporter Saudi Arabia.

The surge in oil prices stung the U.S. currency across the board.

A weaker dollar supports metals prices as it makes dollar-priced commodities more affordable for foreign investors.

But the feeling that more than sufficient volumes of copper were available on the market was also weighing on prices, analysts said.

"The physical copper supply is very good; scrap is around in abundance and the discounts are quite high," said Herwig Schmidt, head of sales at Triland Metals.

"Inventories have also been rising in the last two months and the market has finally taken notice."

While the short-term outlook has weakened, long-term fundamentals for copper remained good, with a supply shortage expected in 2011, Westgate said.

China's imports of refined copper are likely to have fallen in February because the Lunar New Year holidays cut arrivals, after a 7.4 percent rise in January supported by fabricator restocking.

COPPER CONTANGO

Copper inventories in LME warehouses continue to rise, hitting 412,675 tonnes, the highest level since last July latest data showed. The abundance of material available in the short term pushed the copper market in a $3.5 per tonne contango -- the discount for cash against three-month material.

In other metals, aluminium fell to $2,520 from $2,530 at the close on Wednesday.

But, analysts said they believe the outlook for the metal used in transport and packaging remained positive.

"We expect aluminium prices to remain well supported by strong demand from China and Europe," said Kamil Wlazly, a metals analyst at Metal Bulletin Research.

"The fact that the light metal has been left behind for the past year in the base metals rally could make aluminium a first choice for hedge funds to rebalance their portfolios by moving away from copper."

Tin, untraded in rings, was bid at $31,195 from $31,500 while zinc, used in galvanizing traded at $2,455 from $2,495 Wednesday's close.

Battery material lead was at $2,480 from $2,539 and nickel, untraded in rings, was bid at $27,625 in rings from $28,700.

"Zinc, lead and nickel are the metals with the worst fundamentals and are getting sold more aggressively during this risk-aversion period," RBS analyst Daniel Major said.

Very strong nickel supply growth in the next two years is expected to offset growing demand from the stainless steel industry, he added.

Metal Prices at 1314 GMT Comex copper in cents/lb, LME prices in $/T and SHFE prices in yuan/T Metal Last Change Percent Move End 2010 Ytd Percent

move COMEX Cu 430.75 3.20 +0.75 444.70 -3.14 LME Alum 2519.00 -11.00 -0.43 2470.00 1.98 LME Cu 9435.00 10.00 +0.11 9600.00 -1.72 LME Lead 2478.00 -61.00 -2.40 2550.00 -2.82 LME Nickel 27675.00 -1025.00 -3.57 24750.00 11.82 LME Tin 31195.00 -1155.00 -3.57 26900.00 15.97 LME Zinc 2455.00 -40.00 -1.60 2454.00 0.04 SHFE Alu 17055.00 45.00 +0.26 16840.00 1.28 SHFE Cu* 71420.00 -280.00 -0.39 71850.00 -0.60 SHFE Zin 19140.00 -190.00 -0.98 19475.00 -1.72 ** Benchmark month for COMEX copper * 3rd contract month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07

(Source: http://www.forexyard.com/en/news/METALS-Copper-steadies-on-dollar-Mideast-worries-weigh-2011-02-24T132501Z)