* Need for QE3 in the U.S. "not that high" * Strikes, declining ore grades will exacerbate copper deficit * Coming up: U.S. non-farm payrolls, Aug; 1230 GMT By Silvia Antonioli LONDON, Sept 2 (Reuters) - Copper fell on Friday after better-than-forecast manufacturing data from the United States tempered expectations that the Federal Reserve will announce a third round of quantitative easing, although supply constraints capped losses. Benchmark copper on the London Metal Exchange fell 0.8 percent to $9,075.25 a tonne by 1011 GMT from a close at $9,148 per tonne on Thursday, when it dropped 1.4 percent. It was little changed from last Friday and more than 10 percent down from a record high at $10,190 hit on Feb. 15. Data released on Thursday showed that U.S. manufacturing unexpectedly grew in August and fewer Americans filed new claims for jobless aid last week, which tempered recession fears. "Data was better than expected and yet markets fell because it means that the Federal Reserve is less likely to announce a new round of quantitative easing," said Daniel Briesemann, an analyst at Commerzbank. "The need for QE3 is not that high at the moment although we can't rule it out." The Federal Reserve announcement of quantitative easing plans boosted commodity markets in both previous occasions, and it would likely do so once again, at least temporarily, if a third round was announced, analysts said. "We think that another liquidity boost could only give a short-term boost to the market, while its efficiency in boosting growth is very doubtful and the Fed is well aware of this," said VTB is a research note. Investors are now awaiting U.S. payrolls data later on Friday to have more clues on the health of the world largest economy. Also weighing on copper was the slightly higher dollar compared with a basket of currencies. A stronger U.S. currency makes dollar-priced commodities such as base metals less affordable for holders of other currencies. POSITIVE FUNDAMENTALS Copper fundamentals however, remained positive. "Recent economic data suggests that global growth could stabilize. Moreover China is starting to import more again. This should lead to further price gains," Credit Suisse said in a note. Strikes and declining ore grades will constrain supply and exacerbate a supply deficit expected this year. A prolonged strike at Chile's Escondida copper mine, the world's biggest, could push a global shortfall of copper concentrate deeper into deficit this year. Copper output from Escondida already fell 14 percent in the first half from a year earlier, as it grapples with lower ore grades. However, workers at the world's No. 3 copper mine, Chile's Collahuasi, have decided not to stage a threatened 24-hour stoppage after accepting a deal proposed by the mine's operator. "Copper is getting tighter and tighter due to supply problems," Briesemann said. "Not only strikes but also lower ore grades are cutting production, especially in Chile and Peru." Also underpinning copper prices are plans by Peru's new leftist government to send a closely watched proposal to increase mining royalties to Congress in the next two weeks. Although this is unlikely to have an impact in the short term, in the long term this should be supportive for prices as mining royalties will discourage development of new mining projects in the Latin American country. Analysts also expect Chinese copper consumers will ramp up copper imports soon after tapping into their inventories in the first half this year. Aluminium was at $2,436 from $2,455. Signalling some weakness in the aluminium market, the premium for primary aluminium shipments to Japan in the October-December quarter has been set at $118 per tonne for at least one deal, marking the first decline in three quarters. Tin was at $24,160 from $24,245 while zinc , used to galvanize steel was at $2,218 from $2,239 Thursday's close. Battery material lead was at $2,506.50 from $2,550 and nickel was at $21,597 from $21,750. Metal Prices at 1013 GMT Comex copper in cents/lb, LME prices in $/T and SHFE prices in yuan/T Metal Last Change Pct Move End 2010 Ytd Pct move COMEX Cu 410.60 -4.35 -1.05 444.70 -7.67 LME Alum 2454.50 -0.50 -0.02 2470.00 -0.63 LME Cu 9144.00 -4.00 -0.04 9600.00 -4.75 LME Lead 2549.00 -1.00 -0.04 2550.00 -0.04 LME Nickel 21750.00 0.00 +0.00 24750.00 -12.12 LME Tin 24240.00 -5.00 -0.02 26900.00 -9.89 LME Zinc 2239.00 0.00 +0.00 2454.00 -8.76 SHFE Alu 17435.00 -30.00 -0.17 16840.00 3.53 SHFE Cu* 67830.00 -360.00 -0.53 71850.00 -5.59 SHFE Zin 17065.00 -140.00 -0.81 19475.00 -12.37 ** Benchmark month for COMEX copper * 3rd contract month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07

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