Wednesday, 11 November 2015 00:29
LONDON: Zinc prices tumbled to their lowest in over five years on Tuesday, hit by a strong dollar, worries about oversupply and concern over faltering demand in top metals consumer China.
Stop loss levels were triggered as a wave of selling by funds hit industrial metals, sending copper and nickel to the weakest in over two months, despite recent announcements of output cuts by miners.
Zinc was the hardest hit even though Belgium’s Nyrstar, the world’s top zinc producer, said on Monday it may cut up to another 400,000 tonnes of zinc concentrate output if prices remain depressed.
Three-month zinc on the London Metal Exchange closed down 2.4 percent at $ 1,605 a tonne, paring losses after touching a low of $ 1,576, the weakest since June 2010. Zinc has shed 26 percent so far this year.
“Yesterday’s news should have been constructive for zinc, but the market doesn’t seem to care about output cuts, they don’t think it’s enough basically,” said analyst Edward Meir at broker INTL FCStone in New York.
“The cuts are too little, too late and the market doesn’t trust the permanence of the cuts. Also the cutbacks are being more than offset by questions about slowing demand.”
Concern over the Chinese economy was stoked further on Tuesday after data showed deflationary pressure persisting, although that was a double-edged sword since that might prompt further stimulus from authorities, analysts said.
“The market is pricing in a worst-case scenario (on China’s economic slowdown) and that’s why we don’t really see any significant upside to copper prices,” said Daniel Hynes, senior commodity strategist at ANZ Bank.
Copper dropped 0.8 percent to finish at $ 4,925.50 a tonne after falling as far as $ 4,904.50 a tonne, its weakest since Aug. 26.
It was near this year’s low of $ 4,855 also reached in August, which was copper’s lowest price since 2009. Copper has dropped more than 21 percent this year and is on track for a third annual decline.
Also weighing on metals was the dollar, which hit a seven month peak, making commodities priced in the U.S. currency more expensive to buyers outside the United States.
“It’s the dollar that continues to drive the metals, it’s a headwind for the market,” said analyst Sergey Raevskiy at investment bank SP Angel.
Aluminium dipped 0.1 percent to end at $ 1,508 a tonne while lead dropped 1.5 percent to a two-month low of $ 1,634.
Nickel gave up 0.8 percent to close at $ 9,505 after touching a low of $ 9,425, the weakest since Aug. 26, while tin bucked the weaker trend and jumped 1.2 percent to $ 14,725, rebounding after hitting a two-month low of $ 14,450.
