Tin prices hit their highest in nearly two years on Wednesday on low stocks of metal while copper steadied after the previous session's strong gains, underpinned by a lower dollar. Three-month tin on the London Metal Exchange hit a new high since December 2014 at $20,500 a tonne and closed at $20,425, up 0.5 percent. Inventories in LME warehouses fell to their lowest since 2004 at 2,930 tonnes, with two large holdings of cash contracts and warrants.
"What's accelerating tin's tightening fundamentals is the shortage of stocks on the LME ... as we are not really seeing that much material flowing back into LME warehouses," Societe Generale analyst Robin Bhar said. Tin's scarcity on LME markets has pushed up the premium for the cash contract over the three-month equivalent to more than $200 a tonne this week, its highest since early September.
Benchmark copper closed up 0.1 percent at $4,740 a tonne, following a 2.1 percent advance in the previous session on talks of further fiscal stimulus by top consumer China, which could lift demand for most metals. Prices hit a two-week peak at $4,754 in earlier trade. China is expected to step up copper imports in the coming months as a weaker yuan opens up arbitrage opportunities and demand picks up, partly fuelled by a boom in China's property market, analysts and traders said.
Chilean miner Antofagasta predicted that full-year copper output would be at the lower end of guidance, and production next year would still be low. Aluminium prices closed 0.6 percent up at $1,679 a tonne. Shanghai aluminium jumped 4 percent to its highest in more than two years at 13,995 yuan, tracking higher coal prices and a reaction to China's steel capacity cuts.
Coal can be used in smelting metals such as steel and aluminium. Coal shortages in China after government-led capacity cuts that shut down many mines have spurred prices of the fuel, including coking coal and coke used in steelmaking. Chinese iron ore futures hit their highest in more than two years as a surge in coal prices lifted the demand for higher grade iron ore in order to boost efficiency and use less coal.
"While rising coal prices are fuelling a rally in China-traded metal prices ... support should fade as coal supplies are increasing again," Julius Baer said in a note. LME zinc closed down 1.2 percent at $2,339, retreating from a three-week high in the previous session. Lead closed down 0.2 percent at $2,048 and nickel closed 0.3 percent higher at $10,260.
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