Zinc and copper driven up by supply fears before retreating on strong dollar

LONDON: Zinc prices hit a more than four-year high on supply worries while copper touched a seven-month peak on Tuesday before retreating under pressure from a stronger dollar and a global bond selloff.

Benchmark three-month zinc on the London Metal Exchange was up 1.3% at $3,933 a metric ton by 1020 GMT after touching $3,990 for its highest since May 2022.

Stock markets tumbled on Tuesday and bond yields jumped on the back of renewed fighting in the Middle East.

“The tight supply outlook is the main focus in the industrial metals,” said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen.

“There are concerns about rising yields and the potential increase in funding costs, but it just goes to show that commodities with a tight supply situation can weather the storm when there’s some concern about the demand outlook.”

Zinc snaps six-day rally as rising stocks ease tightness

The most-traded zinc contract on the Shanghai Futures Exchange touched a peak of 27,165 yuan a ton for its highest since January.

Falling refined zinc inventories outside China, tight raw material supply and speculative buying have boosted the metal used to galvanise steel, with August producing its strongest monthly performance since January on both the LME and SHFE.

Available LME zinc inventories, material that has not been earmarked for removal, slumped to 68,250 tons, down 28% in less than a week to their weakest since December last year, data showed on Tuesday.

Tight supply outside China has drawn metal out of the country and into overseas warehouses, supporting prices and lowering inventories in those markets.

“Domestic (Chinese) inventories saw a sharp drawdown on Monday, with spot purchasing concentrated in deliverable brands,” Chinese broker Jinrui Futures said in a note.

LME copper climbed to its highest since January 29 at $14,441.50 a ton before slipping into the red to stand 0.5% down at $14,218.

A stronger dollar makes commodities priced in the U.S. currency more expensive for buyers using other currencies.

LME aluminium rose 0.3% to $3,253 a ton after touching its highest since August 13 at $3,288, lead was little changed at $1,905, nickel shed 0.7% to $16,750 and tin dipped 0.2% to $55,125.