Zinc rose to its highest level in almost three years on Monday amid long-standing worries over falling mine supply going forward, while investors remained cautious about copper following recent gains.
Zinc prices have rallied nearly 13 percent this year, driven primarily by expected closures of mines next year, especially Australia's giant Century mine, and by inventory withdrawals from London Metal Exchange warehouses.
But some market participants were concerned that the metal may have over-reached, at least in the short term.
"The mine-supply gap (in zinc) might not end up as large as expected. I understand Century may find resources to keep the mine operating till end-2016. Plus if we get to $2,500 a tonne, then the Chinese will start cranking up output," Societe Generale analyst Robin Bhar said.
Benchmark three-month LME zincrose to $2,325 a tonne overnight, the loftiest since August 2011. It traded at $2,315 a tonne in official midday rings, up 0.52 percent from Friday.
Output from Century, the world's third biggest, could drop 5 percent this year and is expected to run dry in mid-2015, Chinese owner MMG Ltd <1208.HK> said in April.
The decline comes amid a supply deficit that reached 107,000 tonnes in January to April this year, according to the International Lead and Zinc Study Group (ILZSG).
Still downside risks remain for zinc given the recent gains.
"With new supply coming into the market ... still high levels of inventories and a demand picture from key end-user China that is mixed at best, we expect a short-term correction," Citi said in a note.
Copperwas down 0.22 percent at $7,140 a tonne as rising exchange inventories deterred investors from betting that the metal would go above recent 4-1/2 month highs in the near term.
Acting as a drag on copper, data showed on Monday that euro zone industrial production dropped sharply in May with the energy sector the only one to thrive, highlighting the fragile state of the bloc's recovery.
Looking ahead, markets will be watching for China's money supply figures this week, which may flag an improvement in factory activity in the coming months.
China's fiscal expenditure surged 26.1 percent in June from a year earlier to 1.65 trillion yuan ($265.8 billion), reflecting government efforts to speed up spending to shore up the economy.
China's GDP and industrial output figures on Wednesday this week will also give fresh direction.
In aluminium, scant spot market supplies propelled cash prices to their highest against the benchmark since December 2012 on Friday.
LME aluminiumwas untraded in rings but last bid up a slight 0.08 percent at $1,942.50 a tonne, after rising for the past two weeks.
Higher cash prices will curb marginal profits for some financing deals that have locked metal away from the market, suggesting more stocks may be delivered to LME warehouses.
Also according to Citi, producer selling has capped the recent rally. "We now see little prospect of prices sustaining upside moves outside a $1,850-$1,950/tonne price range in H2," said the bank.
Leadwas last bid up 0.36 percent at $2,214 a tonne, tin was last bid up 0.45 percent at $22,175 a tonne and nickel was last bid down 0.41 percent at $19,300 a tonne.
Source: Reuters
Zinc prices have rallied nearly 13 percent this year, driven primarily by expected closures of mines next year, especially Australia's giant Century mine, and by inventory withdrawals from London Metal Exchange warehouses.
But some market participants were concerned that the metal may have over-reached, at least in the short term.
"The mine-supply gap (in zinc) might not end up as large as expected. I understand Century may find resources to keep the mine operating till end-2016. Plus if we get to $2,500 a tonne, then the Chinese will start cranking up output," Societe Generale analyst Robin Bhar said.
Benchmark three-month LME zinc
Output from Century, the world's third biggest, could drop 5 percent this year and is expected to run dry in mid-2015, Chinese owner MMG Ltd <1208.HK> said in April.
The decline comes amid a supply deficit that reached 107,000 tonnes in January to April this year, according to the International Lead and Zinc Study Group (ILZSG).
Still downside risks remain for zinc given the recent gains.
"With new supply coming into the market ... still high levels of inventories and a demand picture from key end-user China that is mixed at best, we expect a short-term correction," Citi said in a note.
Copper
Acting as a drag on copper, data showed on Monday that euro zone industrial production dropped sharply in May with the energy sector the only one to thrive, highlighting the fragile state of the bloc's recovery.
Looking ahead, markets will be watching for China's money supply figures this week, which may flag an improvement in factory activity in the coming months.
China's fiscal expenditure surged 26.1 percent in June from a year earlier to 1.65 trillion yuan ($265.8 billion), reflecting government efforts to speed up spending to shore up the economy.
China's GDP and industrial output figures on Wednesday this week will also give fresh direction.
In aluminium, scant spot market supplies propelled cash prices to their highest against the benchmark since December 2012 on Friday
LME aluminium
Higher cash prices will curb marginal profits for some financing deals that have locked metal away from the market, suggesting more stocks may be delivered to LME warehouses.
Also according to Citi, producer selling has capped the recent rally. "We now see little prospect of prices sustaining upside moves outside a $1,850-$1,950/tonne price range in H2," said the bank.
Lead
Source: Reuters
