Zinc slips as inventories rise; investors pause after rally

6 November 2017

Zinc prices slipped on Friday, as Chinese inventories rose, while copper pulled back after a rally spurred by prospects for surging demand from electric vehicles.

A proposal to scrap U.S. subsidies for electric vehicles (EVs) helped to dampen investor excitement during the LME Week industry event in London over the potential for strong demand from the EV growth story for metals such as copper and nickel.

Some metals extended losses after the dollar index firmed on the back of strong U.S. economic data.

Three-month London Metal Exchange nickel has climbed by more than $1,100 a tonne since Monday, marking its biggest two-day jump in three years on Tuesday and Wednesday on positive sentiment about EVs.

“Right now, if you look at the prevailing fundamentals, prices are probably above what is justified after all the euphoria of this week,” said Robin Bhar, head of metals research at Societe Generale.

“Between now and the next 12 months we’ve got adequate supply and spreads are generally in contango. Nickel is probably $1,000 above fair value, so that needs to correct.”

Most hedge funds close out their fiscal year at the end of November so will want to take profits before then, Bhar added.

* The dollar rose after the release of U.S. manufacturing and services sector data that beat estimates. A firmer dollar makes commodities priced in the greenback more expensive to buyers using other currencies.

* ZINC: LME benchmark zinc closed down 1.2 percent at $3,219 a tonne after inventories rose in China.

* SHANGHAI STOCKS: Weekly data on Friday showed zinc inventories in warehouses monitored by the Shanghai Futures Exchange ZN-STX-SGH jumped 22 percent while copper stocks climbed 18 percent, indicating supplies were adequate.

* COPPER: LME three-month copper finished 0.5 percent weaker at $6,895 a tonne after closing little changed in the previous session, following a 10 percent gain in the past six weeks.

* EV SUBSIDIES: Also weighing on nickel and copper was the proposal by U.S. House Republicans to eliminate the $7,500 tax credit for electric vehicles at the end of the year.

* LME NICKEL: LME three-month nickel gained 1 percent to end at $12,725 a tonne, ending the week 10 percent higher. The contract hit its highest in more than two years at $13,030 on Wednesday.

* ALUMINIUM: LME aluminium added 0.5 percent to close at $2,185 a tonne, with looming production curbs on Chinese smelters likely to come back into focus next week as traders return from LME Week.

* ALUMINIUM MARGINS: A jump in raw material costs has trimmed aluminium producers’ strong margins in recent months, an executive of Russian aluminium giant Rusal said.

* PRICES: Lead closed up 0.8 percent at $2,463 a tonne, while tin slipped 0.5 percent to $19,550.

Source: Reuters