Zinc, copper rebound on bargain hunting

LONDON — Zinc and other base metal prices rebounded on Monday as investors and consumers took advantage of a sell-off on Friday to buy at lower levels, with strong economic data from top metals consumer China also supporting the market.

Analysts warned, however, that prices still have the potential for a deeper correction after the London Metal Exchange (LME) metals index rallied 21% between early June and early September.

“I think it’s mainly bargain hunting after that fairly savage sell-off we had on Friday but the market’s still nervous,” said Robin Bhar, head of metals research at Societe Generale in London.

“We’ve come up so much and seem to overrun the fundamentals that a period of consolidation or correction would seem to be overdue now.”

Mr. Bhar said he expected a 5-10% correction from recent peaks in the coming weeks or months.

Helping to support metals was data at the weekend showing China’s producer price inflation accelerated more than expected to a four-month high in August, pointing to strong, sustained growth for both factory profits and the economy.

Financial markets were also relieved that North Korea did not conduct another missile test at the weekend.

Benchmark zinc on the LME closed 1.70% higher at $3,083 a ton after sliding 3.10% on Friday.

Zinc also got support from the high winds and storm surges battering the southern United States. Investors worried about possible damage to metal stored in New Orleans, the location that holds 95% of zinc in LME warehouses.

“Front-end spreads have seen bids with the vast majority of LME on-warrant material left sitting in New Orleans, so resultant short fears around hurricane damage,” Alastair Munro at broker Marex Spectron said in a note.

LME three- month copper rose 0.80% to end at $ 6,748 a ton.

LME lead ended 0.50% firmer at $ 2,277 a ton, while on- warrant LME inventories, those not earmarked for delivery, jumped 11% on Monday. The metal mostly used in stainless steel bounced 1.50% to finish at $ 11,750.

Aluminum rose 1.10% to $ 2,122 while tin climbed 1% to $20,750. —