November 16, 2018 / 11:47 AM / 24 days ago

METALS-Signs of tight supply push copper and zinc higher

 (Updates with closing prices)
    By Peter Hobson
    LONDON, Nov 16 (Reuters) - Copper rose on Friday as signs of
supply tightness supported prices, but worries about the outcome
of the U.S.-China trade dispute limited gains. 
    Supply shortages also powered zinc towards its biggest
weekly gain since September. 
    Benchmark copper on the London Metal Exchange         closed
up 0.3 percent at $6,205 a tonne, 2.4 percent higher this week.
    Prices rallied after news that Chinese smelter Jiangxi
Copper             and miner Antofagasta          had agreed
lower treatment and refining charges for 2019, said ING analyst
Warren Patterson.             
    "This is showing that either there is a tightening in
concentrate supply or too much spare smelting capacity in China.
I think it's a mixture of the two," he said. 
    China is the world's biggest consumer of metals.
    Metals received a further boost when the U.S. dollar
weakened after Federal Reserve officials appeared to question
the pace of interest rate rises and from strong U.S.
manufacturing data.                           
    A weaker dollar makes metals cheaper for buyers who hold
other currencies. 
    But while supply-demand fundamentals were good for copper,
uncertainty about U.S.-China trade talks -- which has helped
push metals prices sharply lower since the summer -- were still
weighing on prices, Patterson said.
    
    COPPER STOCKS: Headline copper inventories in LME-registered
warehouses MCUSTX-TOTAL fell by 5,425 tonnes to 161,025
tonnes, nearing last month's 10-year low of 136,675 tonnes. 
    SPREAD: Another signal of tight supply is the premium of
cash copper over the three-month contract MCU0-3, which has
drifted from a near four-year high of $47 last month to $18.50
but is still far above recent norms.
    TECHNICALS: Copper was holding above its technically
important 50-day and 100-day moving averages around
$6,160-$6,165. 
    U.S.-CHINA TRADE TALKS: A senior White House official told
Reuters a written response sent this week by China to U.S.
demands for trade reforms was unlikely to trigger a breakthrough
at talks.             
    ZINC: Benchmark LME zinc         closed 1.2 percent higher
at $2,607 a tonne, up 3.5 percent this week, with stockpiles in
the LME's warehouse system falling to a 10-1/2-year low of
125,400 tonnes. MZNSTX-TOTAL
    SPREAD: The premium of cash zinc over three-month metal
MZN0-3 has surged to $78.75, the highest since October last
year, from a discount of more than $20 two months ago,
suggesting a shortage of available material. 
    OTHER METALS: LME aluminium         finished up 0.6 percent
at $1,940 a tonne, nickel         ended 0.9 percent higher at
$11,360, lead         gained 3.6 percent to $1,998 and tin
        closed down 0.2 percent at $19,350. 
    

    
 (Additional reporting by Mai Nguyen
Editing by Edmund Blair, Dale Hudson and Kirsten Donovan)
  
 
 
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