Zinc, copper slump on LME; nickel up

London Metal Exchange three-month zinc and copper continued their sharp losses Friday, incurring roughly 10% and 4% drops respectively, but traders expect some consolidation after the sharp losses in the coming week.

Three-month zinc fell roughly 10% to a PM kerb of $3,080 a metric ton from Thursday while three-month copper dropped roughly 4% to a PM kerb of $5,345/ton.

Fund liquidation pressured zinc after the metal had a very poor close Thursday, one London-based trader said. Speculative selling based on technicals added fuel to the fire sending prices further and further lower, another trader said.

Adding to the downward pressure was below-expectations economic data out of the US. January non-farm payrolls came in at up 111,000, below expectations of a 155,000 rise, and the jobless rate rose to 4.6% from 4.5% in December, data released Friday showed.

LME zinc stocks fell 175 tons to 98,350 tons Friday, according to LME data. Currently, LME inventories are down around 70% on the year, standing at roughly one week's worth of global zinc demand.

However, the rate of decline in LME stocks has eased since December, said analysts.

In addition, a surge in zinc exports from China over the past few months and an increase in Chinese production has made physical stocks more readily available and thus pressured prices, the LME trader said.

Copper stocks fell by 850 metric tons to 215,250 tons Friday.

However, lurking in the background is news that a strike at Cerro Colorado's copper mine in Chile remains a possibility now unions have voted in favor of action. If mediation is sought and talks fall through, a strike would start Feb. 7.

Meanwhile three-month nickel was the only metal to hold gains, rising over 1% to a PM kerb of $37,350/ton driven by critically low LME stocks. Prices are supported by a drawdown in nickel stocks by 144 tons to 3,222 tons Friday, as well as canceled warrants, or product accounted for and to be drawn down at a later date, at 25.5%.

Prices in dollar a metric ton.
3 Months Metal     Bid-Ask        Change from
                                 Thursday PM kerb
Copper          5345.0-5350.0       Dn  255
Lead            1630.0-1631.0       Dn   35
Zinc            3080.0-3085.0       Dn  309
Aluminium       2720.0-2723.0       Dn   30
Nickel         37350.0-37400.0      Up  525
Tin            11675.0-11700.0      Dn  220