LIVE FUTURES 14/10: LME zinc price at highest since 2007; copper cash/3-month spread in backwardation

Supply concerns continue to support zinc’s three-month price on the London Metal Exchange, which reached a peak of $3,837.50 per tonne on the morning on Thursday October 14, with most other base metal prices also starting the day higher.

Reports that Nyrstar - one of Europe and the world’s major zinc producers - is set to cut production by up to 50% at its three European smelters in response to the surge in energy prices have fueled upside momentum, Fastmarkets’ analyst James Moore said on Thursday.

“The plants have a combined capacity of 730,000 tonnes per year, which could equate to a reduction of up to 30,000 tonnes per month,” Moore said.

“While we doubt Nyrstar will cut production by the full amount, with power constraints still overhanging Chinese smelters, any loss of metal will compound the currently tight fundamentals implied by the continue drawdown of global stocks,” he added.

At the same time, others highlighted zinc’s strong demand prospects at present.

“We continue to hear that ex-China demand is strong, that steel companies and others are unlikely to flinch with current zinc prices. If you agree, the question is - what happens if China galvanizing steel, die-casting, brass making, rubber manufacturing, hence consumption, picks up...?,” StoneX’s head of base metal sales Michael Cuoco noted on Thursday.

Aluminium’s three-month price also excelled on Thursday morning, setting a new year-to-date peak of $3,148.50 per tonne. The metal’s next resistance level is the 2008 peak, at $3,380 per tonne.

Aluminium has been supported by strong fundamentals, including falling inventories. On the LME, 11,925 tonnes of metal were booked for removal on Thursday - the vast majority of this being in Port Klang, Malaysia - while stocks also fell by a net 1,950 tonnes, taking the total to 1.126 million tonnes, the lowest since March 2020.

Copper’s LME stocks have also been falling, with 10,000 tonnes booked for removal on Thursday from the European warehouses of Rotterdam and Hamburg, which also saw outflows totaling 4,550 tonnes.

The red metal’s cash/three-month spread tightened to a backwardation of $125 per tonne shortly before 9am on Thursday, with its benchmark futures price up by 2.1% at $9,860 per tonne.

Other highlights
Lead’s cash/three-month spread was at a $63.75 per tonne backwardation on Thursday morning, with LME stocks dropping by 350 tonnes to a new year-to-date low of 48,625 tonnes.
On tin’s LME inventories, some 200 tonnes of the metal were booked for removal, taking the total amount of metal to 880 tonnes.

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