Copper rose on Wednesday in response to a retreat in the U.S. dollar from its recent peaks and evidence of tightening supply, while zinc hit a three-week high on longstanding concerns over potential supply constraints.
The dollar dipped versus a currency basket after touching a five-week peak on Tuesday, with a slump in oil prices to seven- month lows calling into question the impact of inflation on the pace of future interest rate hikes.
A weaker dollar makes dollar-priced metals cheaper for non-U.S. investors.
“The fundamentals (for copper) look pretty strong. There’s likely going to be a deficit this year. The (supply) issues we saw in the beginning of the year with Grasberg and Escondida haven’t been resolved … they will resurface,” Nitesh Shah, commodity strategist at ETF Securities, said.
“In China, because this is a year of change in the politburo the authorities are going to be reluctant to let growth slip off drastically,” he said.
* LONDON COPPER: Three-month copper on the London Metal Exchange ended up 1.6 percent at $5,745 a tonne, having hit its lowest since June 8 at $5,630 earlier.
* COPPER SUPPLY: The global world refined copper market showed a 5,000 tonnes deficit in March, compared with a 102,000 tonnes surplus in February, industry data showed on Tuesday.
* ZINC: Zinc ended 3.3 percent higher at $2,640, having touched its highest since May 31 earlier at $2,642, bolstered by the weaker dollar and concerns over tightening supplies, with LME stocks at their lowest since January 2009 <MZN-STOCKS>.
* ALUMINIUM: Aluminium bucked the rising trend in metals, ending down 1 percent at $1,867.
“A large part of the potential production cuts in China should already be priced (in). Aluminium has outperformed all other base metals (this year), despite what we see as an amply supplied market,” Commerzbank said in a note.
* ALUMINIUM SUPPLY: China will launch a crackdown to curb illegal expansion of aluminium capacity in the world’s top producer of the metal, the China Non-Ferrous Metals Industry Association said on Wednesday.
* NICKEL: LME nickel ended 2.1 percent higher at $9,005, following a 2.1 percent slide on Tuesday despite news earlier in the week that about a dozen Indonesian nickel smelters had stopped operations because of a plunge in prices.