LONDON: Zinc prices hit their highest in five weeks on Friday on supply concerns after smelters in top producer China agreed to trim production because of low ore availability and weak profits.
Three-month zinc on the London Metal Exchange (LME) gained 0.9% to $2,884 a metric ton in official open-outcry trading after touching $2,912 for its highest since July 16.
The 14 top zinc smelters in China agreed this week to adjust planned maintenance on production lines and postpone commissioning of new capacity.
Treatment charges (TCs), the price smelters receive from miners to process ore concentrate into zinc, have been falling since the fourth quarter of 2023 owing to tight ore supply. China accounts for nearly half of global refined zinc production. “The zinc price has some catch-up potential,” said WisdomTree commodity strategist Nitesh Shah. He also noted that inventories on the Shanghai Futures Exchange (SHFE) have declined sharply, falling 33% over the past two months.
LME lead jumped by 2.4% to a three-week high of $2,102 a ton after investors on SHFE were forced to search for overseas supplies after a change in specifications.
The prices of all six LME metals were stronger, helped by investor optimism about the potential of interest rate cuts. US Federal Reserve policymakers on Thursday lined up in support of starting interest rate cuts next month. Fed Chair Jerome Powell is due to speak later on Friday.
“China is still waiting for the US to cut rates, so that could be much more significant. Once the Fed starts, the PBOC will be forced to do a lot more because its economy is weak,” Shah said, referring to China’s central bank.
LME aluminium gained 1.2% to $2,508.50 a ton on tight raw material supply. The metal was set for its biggest weekly gain since mid-April. Tight supply of alumina and bauxite has helped to underpin aluminium prices, which hit a more than six-week high of $2,531 a ton on the LME on Thursday.
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