LONDON: Copper, zinc and other base metals 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.
LME COPPER: Three-month copper rose 1.6 percent to $5,644 a tonne in official trading, after closing slightly lower in the previous session when prices hit the weakest since early January at $5,530 a tonne. It was supported by news that Indonesian workers at American mining giant Freeport McMoran Inc. will stage a month-long protest starting May 1 against layoffs.
COPPER SPREAD: 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.
CHINA OUTPUT: Underlying the healthy supply picture, China's refined copper output rose 8.5 percent in March from a year ago to 764,000 tonnes, its highest since at least December 2015.
ALUMINIUM: LME aluminium climbed 2.1 percent to $1,942 in official rings, despite news that production 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, largely due to worries about an environmental crackdown in China restricting output, but Bhar was wary. "I distrust aluminium because a lot of the rally is built on a potential for cuts and the market could be disappointed."
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 2.8 percent in official trading to $2,622 while nickel was bid up 0.9 percent at $9,420.
Tin was bid up 0.5 percent at $19,875.
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