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13:53:01 09-10-2015 13:45 Copper Prices up on Glencore Cuts to Zinc Supply
LONDON¿Cuts to the supply of zinc by miner Glencore PLC led base metals higher on Friday, including copper, which has recently seen a number of positive announcements on supply curtailments.
Switzerland-based Glencore said on Friday that it will make production cuts to zinc mining equivalent to 4% of the global market. That sent zinc prices to a one-month high in London and dragged almost all base metals with it.
The London Metal Exchange's three-month copper contract was up 3.8% at $5,329 a ton, while the LME's three-month zinc contract was up 9.1% at $1,818.50 a metric ton.
Aluminum was up 3.8% at $1,619.50 a ton, nickel was up 3.5% at $10,535 a ton, lead was up 5.4% at $1,761.50 a ton and tin was up 0.7% at $16,010 a ton.
The miner said it would reduce zinc output by 500,000 metric tons, including closing its Lady Loretta mine in Australia and Iscaycruz mine in Peru, in a bid to shore up zinc prices.
"Prices are unsustainably low¿a large chunk of the production is not profitable, so definitely something like today's announcement by Glencore is an eye-opener to the market," said Eugen Weinberg, head of commodities research at Commerzbank. "It's all about supply."
Zinc has, along with other commodities from oil to wheat, been under pressure from oversupply, sliding to a five-year low of $1,601.50/ton on Sept. 28.
"We had a slight deficit and this¿tightens up the market significantly, " said Daniel Hynes, base-metals analyst at ANZ Bank. "I think the rally has a pretty good chance of being sustained, but there are demand side concerns."
Xiao Fu, head of commodity markets strategy at BOCI Global Commodities, said further destocking of zinc and a more visible recovery in China's industrial activities will be needed to propel a more sustained price rally.
But on Friday, traders and investors were focusing on zinc's news as being a good sign for the whole base metals market.
In recent weeks, Glencore had also announced cuts to its copper production, which will amount to 1.8% of last year's global copper production, according to Commerzbank calculations. The metal has also gained amid potential supply constraints in Latin America, the biggest producing area, including an earthquake and strike action at mines.
Copper prices were also seeing support from a weaker dollar following the release of the minutes from the Federal Open Market Committee's September meeting, where it had decided not to raise U.S. interest rates. The markets interpreted the minutes as further proof that U.S. interest rates may remain on hold for the rest of the year.
Alistair MacDonald and Biman Mukherji contributed to this article.
Write to Ese Erheriene at ese.erheriene@wsj.com
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