Singapore 01/11/2016 - Base metals on the London Metal Exchange were buoyed by positive Chinese manufacturing data on Tuesday, November 1, with zinc getting a further boost from news that Glencore has shuttered one of its zinc mine in Australia.
The three-month zinc price touched $2,485 per tonne on Tuesday - the highest since August 1, 2011. It recently traded at $2,473, up $15 from Monday’s close with around 3,200 lots changing hands.
Glencore’s Black Star Open Cut mine in Queensland Australia has been put on care and maintenance after mining out its existing reserve, Glencore was cited as saying in a statement by several media reports.
The mine had produced around 40 million tonnes of ore and 1.75 million tonnes of zinc since its opening in 2004.
“The market is concerned that zinc supply will tighten further,” China’s Mailyard Futures said in a report on Tuesday.
While a tightening supply is the biggest support for zinc prices now, refined zinc production has yet to show any decline as smelters continue to make profits, and this is preventing zinc from rising further, China’s Galaxy Futures noted in a report on Monday.
The most active January Shanghai Futures Exchange zinc contract also hit a near six-year high of 20,005 yuan per tonne. It closed at 19,775 yuan on Tuesday, up 435 yuan from the previous close.
The refined zinc market is expected to continue to tighten into next year, according to the International Lead and Zinc Study Group (ILZSG).
Global usage of refined zinc should outpace production by 340,000 tonnes in 2016, causing a further drawdown of both reported and unreported stocks. In 2017, the market is set to remain in a deficit, with an anticipated shortage of 248,000 tonnes of material, the Lisbon-based trade group said in a report on Monday.
Meanwhile, the three-month copper price rose $32 to $4,885 per tonne, with about 3,500 lots of the contract changing hands so far.
Earlier today, China’s National Bureau of Statistics showed the country’s official manufacturing PMI for October at 51.2. The figure was better than market forecast of 50.4 and September’s reading of also 50.4. An above 50 reading signifies expansion, and below, contraction.
The Caixin manufacturing PMI for September came in at 51.2 - above expectations of 50.2 and September’s reading of 50.1 – marking the fastest growth seen in the sector in two years.
“The economy seems to be stabilising for the moment, owing primarily to policies implemented to sustain growth. Supportive policies must be continued, or industrial output may be dragged down by a slowdown in investment,” Zhong Zhengsheng, Director of Macroeconomic Analysis at CEBM Group said.
The official PMI is more focused on large state-owned firms, while the independently surveyed Caixin PMI is closely watched for conditions among the country’s private sector.
Additionally, the country’s official non-manufacturing PMI, which represents the services sector was at 54.0 in October, up from September’s figure of 53.7.
In central bank news, the Bank of Japan kept interest rates unchanged but pushed back its forecast date for hitting 2% inflation to around fiscal 2018, a year later than its previous target of fiscal 2017.
Key US economic data due later today includes final manufacturing PMI, ISM manufacturing PMI, construction spending, IBD/TIPP economic optimism, and ISM manufacturing prices.
In other commodities, the Brent crude oil spot price rose 0.1% to $48.86 per barrel, while the Texas light sweet crude oil spot price slipped 0.04% to $46.89 so far on Tuesday.
In currencies, the US dollar index eased 0.08% to 98.33 recently.
In other metals, the three-month aluminium price was recently at $1,737.50, up $3.50 from Tuesday’s close. The aluminium spread has narrowed with a small contango in the benchmark cash/threes of $0.50. The cash/Dec and Cash/Jan date were recently trading level.
The three-month nickel price rose $45 to recently trade at $10,520 per tonne, and the three-month lead price was recently at $2,074.50, up $9.50. The three-month tin price gained $70 to $20,770.