LONDON: Copper and zinc prices hit multi-week lows on Tuesday as investors liquidated long positions on concerns that markets had decent supplies despite strikes and shutdowns after big inflows of copper inventories.
On-warrant copper inventories in London Metal Exchange warehouses - those not earmarked for shipment and available to investors - have soared by 74 percent this week after inflows into mostly Asian depots, LME data showed.
On Friday a weekly 23,974-tonne build in SHFE stocks took total inventories to just shy of 320,000 tonnes, the most since last April. "These stock increases are spooking the market but maybe they're reading too much into it, thinking it reflects slowing demand in China or the Asian region," said Robin Bhar, head of metals research at Societe Generale in London.
"There's always a fairly slow start to most years, Q1 is pretty weak and then we have a strong Q2 and I don't see anything to change that pattern. I would think there are buyers out there willing to buy the dips."
Three-month copper on the London Metal Exchange had declined 0.8 percent to $5,814 a tonne by 1120 GMT, the weakest since Feb. 10, after 1 percent losses in the previous session.
Disruptions at the world's two biggest mines, in Chile and Indonesia respectively, pushed copper back above the $6,000 a tonne mark last month, while workers at Cerro Verde mine, one of the largest copper producers in Peru, also plan to start a five-day strike on Friday.
Consensus is growing that the drop in mine supply matched with a pick-up in global demand will elevate prices.
"We think prices go higher. We do have a $6,500 target for copper in six to 12 months," said UBS Wealth Management analyst Dominic Schnider in Hong Kong.
"We do see stronger global copper demand at 3.7 percent growth this year, because global industrial production is going to accelerate. We're bullish, we see up to a 500,000 tonne deficit this year."
Zinc fell 1.2 percent to $2,707 after touching $2,691.50, the lowest since Jan. 17, as investors awaited more evidence that closures and suspensions of major mines last year were tightening the refined market.
"In zinc the story has not changed much since last year. The concentrate market is likely at peak levels of tightness; however, so far this year, refined tightness has yet to fully arrive," JP Morgan analyst Natasha Kaneva said in a note.
Nickel gave up 1 percent to $10,980 after further news from top ore exporter the Philippines.
The Philippine environment minister has asked President Rodrigo Duterte to halt a second review of 28 mines that she ordered closed or suspended.
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