London zinc extends gains on tight mart, weaker dollar

MELBOURNE — London zinc surged by nearly three percent on Monday to its highest in more than 10 years, with a weaker dollar triggering buying amid bets that tightening global supply will propel prices even higher.

“The release of manufacturing data in China this week should set the tone for commodity markets. Another strong PMI should snuff out any concerns over weakening demand leading into the Chinese New Year,” ANZ said in a report.

London Metal Exchange (LME) zinc rose 2.30% to $3,558 a ton by 0500 GMT, having earlier topped out at $ 3,584, the highest since mid-2007. In Shanghai prices climbed nearly four percent before settling up 3.40%.

Under- investment in zinc mines during the economic downturn over the last 10 years has led to shortfall of the metal: LME zinc inventories have slumped below 180,000 tons, of which less than 100,000 tons is available to market — the least since 2008. In China, exchange stockpiles ticked higher last week but also remain close to 10-year lows.

Sister metal lead and steellinked material nickel followed in zinc’s wake, up by 1.60 and 2.50% respectively.

LME copper climbed 0.90% to $7,145 a ton, erasing the previous session’s losses. Shanghai Futures Exchange copper edged up 0.10% to 53,640 yuan ($8,481) a ton.

The dollar crawled up from lows on Monday but struggled to pull ahead from six straight weeks of losses on its evaporating yield advantage and doubts about Washington’s commitment to a strong currency.

China’s economic growth will likely slow to 6.50-6.80% this year, a senior official at the country’s top economic planner wrote in the Beijing Daily on Monday, while warning about the risks of “Black Swan” and “Gray Rhino” events.

Hedge funds and money managers cut their net long position in COMEX copper contracts in the week to Jan. 23, US Commodity Futures Trading Commission data showed on Friday.

Chile’s Codelco has struck a contract deal with workers at its Andina copper mine, it said on Saturday, as the state-owned firm tries to reach advance agreements with some unions in a year expected to be rife with labor talks. —