Aluminium and zinc highest since October on global growth hopes

03 Mar, 2016

Copper, aluminium and zinc hit their highest levels in several months on Wednesday, bolstered by optimism that global growth will pick up and as speculators chased the rally. Industrial metals also benefited from a "risk-on" attitude in financial markets that swept global shares and bond yields higher after investors latched onto positive data such as stronger than expected US private sector jobs growth.
Announcements from China this week of a cut in bank reserve requirements and structural reforms that have helped real estate prices climb helped underpin sentiment.
Some analysts cautioned, however, that the rallies in some metals were premature and may not be sustainable.
Three-month zinc on the London Metal Exchange climbed 1.7 percent to close at $1,815 a tonne, the strongest since mid-October.
The surge was helped by zinc breaking through the 200-day moving average of $1,771 on Tuesday, an important level for speculators who trade based on chart-based patterns.
Zinc, which is mainly used to galvanise steel, is the best performing LME metal this year, rising nearly 13 percent on forecasts that shortages will develop due to the closure of major mines.
"The story is great, but it's a bit premature," said analyst Vivienne Lloyd at Macquarie in London. "Given that (physical) premia in the US remain soft, there should be a bit of a retracement from current levels."
Standard Chartered also noted zinc stocks have grown in China along with the weaker premiums, suggesting a soft patch in demand.
"We project zinc prices to average $1,650 a tonne in the first half before averaging $1,850 a tonne in the second half," the bank said in a note.
LME copper ended up 1.6 percent at $4,790 a tonne, the highest since November 16, extending a 0.5 percent gain from the previous session.
LME copper inventories fell again on Wednesday to 190,750 tonnes, the lowest in nearly 14 months.
"The leanness of stocks on the LME is probably helping the copper market and the technicals have been supportive over the past few days, with prices breaking through the 100-day moving average today," Lloyd said.
Fundamentals, however, were still very poor in China following the Lunar New Year holiday, said Chunlan Li of consultancy CRU in Beijing. Premiums for spot refined copper imports into Shanghai fell to the lowest in three months this week as demand slumps, traders said.
LME aluminium rose 1.1 percent to finish at $1,589 a tonne after touching $1,595, the highest since October 16. Aluminium on the LME has moved to its first speculative long position since May last year, according to broker Marex Spectron, which compiles its own positioning estimates.
Tin closed 1.3 percent higher at $16,200 a tonne after hitting a peak of $16,300, the strongest since October 9. Lead shot up 2.3 percent to finish at $1,817 and nickel climbed 0.5 percent to $8,725.

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