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Comment by Wiktor Bielski, Head of commodities research at VTB Capital for Reuters

6 June 2016
Reuters
Zinc hits new 10-month peak, copper at four-week high

VTB-Wiktor40.JPG
 
* LME copper inventories jump 20,725 tonnes

* With light China demand, ample supply, copper to range trade

* Indonesia tin exports fall 22 pct m/m in May (Updates with closing prices)

Zinc prices climbed on Monday to a new 10-month peak on persistent concerns about declining supplies while copper rose to the highest in four weeks after the dollar slid.

Three month zinc on the London Metal Exchange closed up 1.7 percent at $2,026 a tonne, the strongest since July 22 last year, after a rise of 0.5 percent on Friday.

Zinc is by far the best performing LME metal this year, rallying 26 percent on forecasts that tightening supplies will cause shortages.

"If you've closed two of the three biggest mines in the world and Glencore has also cut production, certainly we'll have nothing other than a deficit this year, while LME zinc stocks continue to fall steadily," said Wiktor Bielski, head of commodities research at VTB Capital.

LME warehouse inventories have slid 24 percent since mid-February to 379,875 tonnes, the lowest since July 2009.

"I think there's still plenty of upside, it just depends on how quickly it gets there. Every technical indicator says buy zinc, or certainly don't be short or you'll get into trouble," Bielski added.

But high prices are weighing on physical zinc demand in China, where premiums have dropped to $115 for bonded material from $135 in late May.
  
LME copper ended unchanged at $4,688 a tonne, having earlier touched $4,748 which was the strongest since May 12. Prices rose 1.7 percent on Friday.
Metals markets were bolstered after the dollar slid on Friday to the lowest in more than three weeks after a weak jobs report pushed back expectations for a rate rise this month.

The dollar index was largely flat on Monday. A weak dollar helps commodities by making them cheaper for buyers outside the United States.
A speech by Federal Reserve chief Janet Yellen on Monday evening will be watched very closely.

"In the absence of cutbacks (partly because most miners are still profitable) and questions about 'real' Chinese demand, we think (copper) prices will likely remain range-bound over the course of June and see a $4,500-$4,850 band in place," said broker INTL FC Stone.

A flurry of data from China in the coming weeks is expected to reinforce views that the world's second-largest economy is slowly steadying but not gaining momentum, a Reuters' poll showed.

LME tin closed 2.1 percent stronger at $16,945 a tonne, the highest in nearly three weeks, after tin shipments from top exporter Indonesia slipped in May by 22 percent from the previous month, a trade ministry official said.

Aluminium finished 0.6 percent firmer at $1,552.50, nickel rose 1.9 percent to $8,665 while lead gained 0.9 percent to end at $1,741.50.

Source

VTB Capital

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