Shanghai metals futures rose on Monday, keeping pace with a stronger showing in London futures. "We're seeing some spillover from Friday's stronger numbers in copper and aluminium, which is giving most metals an edge today," a dealer in Sydney said.
October Shanghai copper the most active contract, rose 0.7 percent to 61,470 yuan ($9,000) a tonne in the afternoon session. But macro-economic and demand concerns were mounting, according to analysts, particularly in nickel, where the LME-three-month contract was only slightly above last week's two year low.
"Weak demand is also causing concern in the copper market but is being countered by continuing supply disruptions," Goldman Sachs JB Were analyst Malcom Southwood said in a report.
Last week Chile's Codelco and US-based Freeport McMoran lowered production guidance, while BHP Billiton Ltd/Plc warned output from its Escondida mine - accounting for almost 10 percent of world supply - would drop 10-15 percent in the 2009 financial year. Shanghai October zinc rose 0.2 percent to 15,305 yuan, while London zinc added $10. After starting the year at $2,365 a tonne, zinc is down by more than a fifth this year, weighed by growing concerns that a global surplus of metal will persist.
Banking group UBS forecasts a surplus of 600,000 tonnes of zinc this year will replace last year's 200,000-tonne deficit. Still, rising costs of mining combined with weakening prices was forcing some mines to close, which could still trim the surplus, it said.
"This trend is usually not factored into the forecasts, which means that if the operating costs remain elevated and some hig cost producers become uneconomical, then actual supplies might be lower than forecast," UBS said in a note to clients.
Canada's Teck Cominco Ltd is closing its Lennard Shelf zinc mine in Australia next month, while plans to dig West Africa's first zinc mine in impoverished Burkina Faso were scrapped due to funding problems linked to depressed zinc prices.
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