Commodity reported that all the metals apart from Nickel closed higher and has continued to strengthen on Friday. Copper breaking above USD 8,000 per tonne after markets took some comfort from Tuesday's ECB rate cut and scrapping of the Greek referendum.
The move up in prices has come alongside a tightening in nearby spreads for many metals, particularly in Zinc with the cash to three month spread the tightest since December 2010.
This tightening is we believe being driven by a combination of short covering and a limited of availability of spot metal as a result of financing deals. SHFE copper and aluminum inventories increased this week while Zinc and Lead continued to decline. The drop in zinc and lead stocks in Barclays view reflects tightening in spot availability as producers hold back on sales due to lower prices.
Further highlighting the weakness in Copper supply this year is Xstrata’s estimate for 2011 global copper mine output growth to be the weakest since 2002. The company estimates global mine production to rise by only 40 Kilo tonne this year. In bank’s view even this could prove to be optimistic given for instance the ongoing losses sustained at Freeport McMoRan facilities.
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