Bullish technicals, a weaker dollar and low inventories pushed lead to a new all-time high at the London Metals Exchange Wednesday, but below-expectations U.S. economic data released late Wednesday pushed copper and aluminium to session lows, said analysts and traders.
LME three-month zinc prices hit a new all-time high of $4,320 a metric ton earlier Wednesday due to strong speculative demand, before giving up gains by late afternoon. Zinc's early bullish sentiment helped spark a rally in lead prices which hit a new all-time high of $1,690/ton before modestly retreating.
Bullish technicals, low stocks, a weaker dollar as well as an influx of first-of-the month buying pushed lead prices higher, said Mike Skinner at Standard Bank. Moreover, the lead market is following in the footsteps of zinc's earlier rise, Skinner added.
Meanwhile, in afternoon trading, the dollar fell sharply after weaker-than-expected reports on U.S. manufacturing and construction activity reinforced market sentiment that the U.S. economy is struggling.
A weaker dollar always supports the metals complex, said Skinner, however, not all the metals react to dollar weakness in the same way.
Three-month copper prices fell to a four-week low of $7,090/ton late Wednesday due to rising LME stocks, falling worldwide premiums and lower-than-expected U.S. manufacturing data, said Michael Widmer of Calyon Financial.
The U.S. Institute for Supply Management's October manufacturing index stood at 51.2, below economists forecasts of 53.5, while U.S. construction spending declined for a fifth straight month in September, dragged down by a continued slide in home-building.
Aluminium followed copper's drop by falling to a one-week low of $2,715/ton as market participants took profits.
LME aluminium warehouse stocks increased by 2,150 tons to 681,050 tons Wednesday, while LME copper stocks increased by 4,675 tons to 135,175 tons.
"In the copper market LME stocks are at their highest levels for the year but are still critically low by any historical comparison," Robin Bhar of UBS said.
However, the smaller markets such as lead and zinc have benefited from the range-bound performance of larger liquidity markets, such as copper, Jon Bergtheil of J.P. Morgan said.
Meanwhile, tin prices were under downward pressure all day due to rising tin stocks and news that Bolivia may wait before going ahead with possible plans to nationalize its metals industries.
Bolivian President Evo Morales Tuesday backed off plans announced earlier this month to nationalize Bolivia's mines, but restated his desire to eventually recover control of the South American country's mineral wealth. Bolivia is one of the world's largest tin producers.
Tin last traded at $9,950/ton, Wednesday's low.
3 months metal (prices in dollars a ton)
Bid – Ask, Change from Tuesday PM kerb
Copper 7150.00-7160.00 Dn 225.00
Lead 1665.00-1670.00 Up 50.00
Zinc 4210.00-4211.00 Dn 10.00
Aluminium 2731.00-2732.00 Dn 58.00
Nickel 30950.00-31000.00 Dn 350.00
Tin 10075.00-10100.00 Dn 175.00