Zinc, Base Metals Reported Positive Performance at LME

Zinc led the rally as metal prices surged to a five-week high, driven by investors closing out bearish positions. The surge was driven by signs of tightening supplies and robust commodities demand in China. 

Aluminum prices rose as much as 1.8% to US$2,540/t, continuing a rebound driven by short-covering on the London Metal Exchange (LME). Base metals rallied on Mar. 7, 2024, supported by strong Chinese demand for raw materials such as coal, crude oil, and iron ore.

The resurgence in base metals was also attributed to South Korea-based non-ferrous metals producer Young Poong reducing refined zinc production at its Seokpo smelter, which provided support and potentially rebalanced spot market supply. Al Munro, Analyst, Marex Group noted the rally could face resistance above US$2,600, a level at which exchange stock deliveries have occurred over the past year.

Zinc smelters have seen a sharp reduction in processing fees, leading to speculation about further cuts as miners struggle to increase output. “Metal market participants have held perennially bearish views on zinc on expectations that mine supply increases would push the market into surplus. But the anticipated glut has so far not materialized, because mined and refined production have consistently underperformed,” said Michael Widmer, Commodity Strategist, Bank of America. 

Copper smelters have also experienced a decline in spot processing fees, leading to discussions among industry players in Beijing about potential measures to counter this trend, including a joint production cut. However, global leading copper producer Nonferrous Metals Group Holdings says that it is not planning output cuts, as strong demand growth is expected, especially from the electric vehicles (EV) and new-energy sectors.