Copper, Zinc Jump on Bets Skid in Industrial Metals Was Overdone

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Copper jumped the most in five months and zinc posted the biggest gain in a year on speculation that the slump in industrial metals to the lowest since the global financial crisis was overdone.

Bellwether copper’s 14-day relative-strength index, a gauge of price momentum, fell below 30 on Tuesday, with other metals around the threshold. That’s a signal to analysts who study charts that metals may have fallen too fast. Traders with bearish bets have been making purchases to unwind those positions, Bank of China International Ltd said.

“We had a very steep selloff yesterday,” Xiao Fu, head of commodity strategy at Bank of China International in London, said in a telephone interview. “The sentiment has stabilized a bit near-term, but the next couple of days will be key.”

Copper for delivery in three months rose 3.4 percent to settle at $5,520 a metric ton ($2.50 a pound) at 5:50 p.m. on the London Metal Exchange, the biggest gain since Feb. 3. The price touched $5,240, the lowest since July 2009.

Zinc jumped 2.7 percent to $1,983 a ton, the biggest advance since July 2, 2014. Aluminum, lead, nickel and tin also climbed.

The LME index of six prices advanced 2.6 percent to 2,519.8, the largest gain since April 30. On Tuesday, the gauge tumbled 4 percent to 2,455.4, a six-year low, on concern that China’s stock-market rout and turmoil in Greece will erode commodity demand.

Losing Money

As much as 65 percent of nickel producers are losing money at current prices, and about 10 percent of copper mines and 20 percent of aluminum smelters outside China are unprofitable, Standard Chartered Plc estimates.

“This suggests there is potential for some short-covering support for prices if cuts are announced” on production in coming weeks, Nicholas Snowdon, an analyst at Standard Chartered in London, said in an e-mail.

On the Comex in New York, copper futures for September delivery advanced 2.1 percent to $2.497 a pound. Aggregate trading was 90 percent above the 100-day average, according to data compiled by Bloomberg.

The Bloomberg World Mining Index of 79 stocks fell 2.3 percent to 168.45 after touching 167.81, the lowest in more than six years. The gauge headed for the 10th straight decline, the longest slump since August 2003, when the data starts.

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