Copper, zinc push higher as speculators return to market
LONDON: Copper, zinc and other base metal prices gained on Thursday as investors, speculators and consumers resumed buying after recent losses, expecting increased seasonal demand.
The London Metal Exchange index of the six major base metals had slid about 7 percent during April up to Tuesday after the easing of supply problems such as a strike in top copper producer Chile.
But after prices largely stabilised on Wednesday, investors gained confidence to return to the market since the second quarter is regarded as the peak period for physical demand because the construction industry gears up in spring.
During the prior rally, the LME index had surged 23 percent from late October to the end of March, which many analysts regarded as excessive.
“With a lot of speculative excess, we needed for that to be addressed, which has happened with the sell-off in copper and zinc. But now we’re into the second quarter so we should expect more physical interest,” said Robin Bhar, head of metals research at Societe Generale.
“I suspect that the CTA models are starting to flash some buy signals since prices have held above those longer-term moving averages and consumers have been waiting for a pull back.”
Commodity Trading Advisors (CTAs) often run funds that use computer models to track momentum and technical signals, such as the 200-day moving average, which zinc and lead tested but remained above.
Three-month copper was up 1.1 percent at $5,616.50 a tonne by 1406 GMT, after closing slightly lower in the previous session when prices hit the weakest since early January at $5,530. It was supported by news that Indonesian workers at US mining giant Freeport McMoran Inc will stage a month-long protest starting May 1 against layoffs.
LME copper remained in a deep contango, indicating plentiful supply. The discount of LME cash copper to the three-month contract was at $32.75 a tonne, not far from $35.25 seen earlier in the month, the biggest discount since June 2013.
Underlying the healthy supply picture, China’s refined copper output rose 8.5 percent in March from a year earlier to 764,000 tonnes, its highest since at least December 2015.
LME aluminium climbed 1.9 percent to $1,940, despite news that output in top producer China rose to 2.707 million tonnes in March from 2.534 million in February.
The metal is the biggest LME gainer this year with a rise of 15 percent. “High prices and optimism about demand are encouraging additional supply, but we are concerned that a surplus in the market will become evident later in the year,” chief commodities economist Caroline Bain at Capital Economics said in a note.
Nickel and zinc, both used in steel-making, got a boost after iron ore and steel prices in China bounced back from a three-day fall. Zinc was the biggest LME gainer with a rise of 2.6 percent to $2,617. Nickel added 1.2 percent at $9,455.
Tin dipped 0.3 percent to $19,720 and lead edged down 0.1 percent to $2,157.50.—Reuters
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