London zinc edges towards decade-high on back of steel price rally

MELBOURNE(Reuters) - London zinc was edging towards its highest in a decade on Wednesday, boosted as a months-long rally in steel prices also pushes up markets for steelmaking raw materials.

FUNDAMENTALS

London Metal Exchange zinc peaked at $2,982 a tonne, just a touch away from cracking its November, 2016-high at $2.985, a break of which would take it back to its most expensive since Oct 2007. The galvanising metal has rallied on prospects of tightening supply against red hot China steel production.

LME aluminium hit its highest since November, 2014 at $2,065 a tonne as Chinese capacity cuts extend to the sector as Beijing tries to clean up its skies ahead of the winter heating season. A break above $2,078.75 would open the way to prices last seen in September, 2014.

The world's top aluminium maker, China Hongqiao Group clarified in a notice to the Hong Kong Exchange that it has shut down 2.68 million tonnes of production capacity amid the country's supply side reform, representing 29 percent of group's total production capacity of aluminium products.

LME copper was flat at $6,379 a tonne, having closed a tad softer and still below its most recent 2-1/2 year top of $6,515.

On the Shanghai Futures Exchange, copper was little changed, but zinc and aluminium were trading up 1.5 and 2 percent respectively.

China's short-term growth outlook has strengthened, but there is growing risk of a sharp medium-term adjustment due to reliance on stimulus to meet targets and a credit-expansion path that may be "dangerous", the International Monetary Fund said on Tuesday.

Steel and iron ore futures in China steaded on Wednesday having hit their lowest in more than a week in the prior session after the Shanghai exchange hiked fees to tame speculative trading. Analysts said the retreat could be fleeting, with demand in the world's top consumer expected to remain strong as Beijing sustains infrastructure spending.

Private equity house EMR Capital has purchased an 80 percent stake in a Zambian copper mine from African Rainbow Minerals (ARM) and its partner for $97.10 million, ARM said on Tuesday.

Zambia's state power company reduced electricity supply to two First Quantum Minerals copper mines on Monday, after a dispute over new, higher prices, Energy Minister David Mabumb said on Tuesday.

Mergers and acquisitions by Chinese companies in countries that are part of the Belt and Road initiative are soaring, even as Beijing cracks down on China's acquisitive conglomerates to restrict capital outflows.

MARKETS NEWS

The dollar hoarded hefty gains on Wednesday after strong U.S. retail data put a Federal Reserve rate hike back on the agenda, while Asia stocks inched ahead as tensions over North Korea simmered down little.

Courtesy : Reuters