Zinc hit its highest in more than a decade on Friday as concerns over market tightness persisted, while copper hit a two-week low as Chinese investor interest was muted with the Lunar New Year holidays looming. Zinc stocks held in London Metal Exchange warehouses fell 250 tonnes to their lowest since late 2008, data showed on Friday, down about a third from their October peak.
The global zinc market deficit widened to 36,900 tonnes in October from a revised deficit of 35,900 tonnes in September, the latest industry data show. "We've always seen Q1 2018 as the peak of the zinc rally and were looking previously for $3,400/t. Zinc has got very strong momentum, it's entirely possible it could pierce that level on a three- to six-month basis," said Macquarie analyst Vivienne Lloyd.
But she added: "Zinc supply is slowly coming back and the greater length of time zinc displays a large price disparity to aluminium the more likely we'll see substitution."
Three-month zinc on the London Metal Exchange ended down 0.2 percent at $3,354 a tonne, having hit its highest since August 2007 at $3,375. Indicating near-term market tightness, the premium for cash over the three-month contract was at $22.50 a tonne, against a $10.25 discount on December 20.
Copper ended down 1 percent at $7,120 a tonne, after gaining 7 percent in December. "Physical interest remains muted across the majority of these metals and Chinese buying (is) likely to remain (muted) until after their New Year holidays next month," said Marex Spectron in a note.
A blizzard of data in coming weeks is expected to show China's economy ended a strong 2017 on a slightly softer note, but activity has likely remained more resilient than expected despite a crackdown on industrial pollution and a cooling property market. Unionised workers at Glencore's Lomas Bayas copper mine in Chile rejected a final contract offer and began government-facilitated mediation on Thursday to avoid a strike.
China will continue to "unswervingly" cut existing steel capacity and strictly ban the launch of any new steelmaking facilities in 2018, its government said this week. Lead ended down 1.8 percent at $2,540, aluminium closed down 2.1 percent at $2,203, tin ended up 0.6 percent at $19,975 while nickel closed down 1 percent at $12,525.