Zinc rose to a fresh five-year high on Tuesday on expectations of tight supply, while a softer dollar helped tin reach a two-year peak and aluminium its highest in 15 months. All three metals pulled back slightly after the rally as the market consolidated recent strong gains. Trading conditions were thinned by the absence of many traders for the London Metal Exchange Week gathering.
Zinc, widely used in alloys, jumped after Glencore said on Monday it had shuttered its Black Star mine in Queensland. Benchmark zinc on the LME reached a peak of $2,485, its highest since August 2011, before easing. It closed 0.3 percent higher at $2,465 a tonne.
"We note that metals have generally performed well over last week and given this is the first day of a new month we would expect dips to be bought," Marex Spectron broker Dee Parera said.
Zinc has been the top LME performer this year, with gains of around 50 percent on worries about shortages developing after mine closures and suspensions. "Even if you factor in a significant amount of new mine supply next year, you're still looking at a sizeable deficit at the refined end of the market, and that is going to start drawing down inventory," ICBC Standard Bank analyst Tom Kendall said.
"Once that starts to draw, you're going to start to see the next leg in this move. There's no doubt that it's gone a little bit exponential in the last four or five days ... so short term, you'd be a bit wary. But we're very much in the camp that says this is the metal with undoubtedly the best fundamentals out there."
The dollar index, which measures the greenback against a basket of six major rivals, fell 0.7 percent, making prices quoted in dollars more competitive for buyers with other currencies. Tin closed at its highest level since September 2014, up 0.7 percent to $20,850 a tonne. The metal has benefited from fears of a supply shortage after stockpiles slipped to 12-year lows.
Aluminium hit its highest since July last year at $1,740.25, before easing back 0.52 percent to $1,725 per tonne. Copper rose to its highest since August 2, supported by an improved demand outlook in China. The metal was up 1.4 percent at $4,919 a tonne, extending gains for a seventh straight session. Analysts said a higher cost of production following a rally in coal prices was underpinning base metals. Lead was little changed from Monday at $2,070 a tonne while nickel inched 0.7 percent lower to $10,410 a tonne.
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