Metal Bulls Reap Biggest Rally in Two Years on U.S. Demand View

Updated on
  • Copper-miner Freeport posts record gain on plans to cut output
  • Metals index rebounds after biggest slump since 2011

Investors who stayed bullish on industrial metals are finally being rewarded as renewed optimism for the demand outlook spurred the biggest price rally in more than two years.

In the U.S., economic growth last quarter exceeded all forecasts in a Bloomberg survey, while in China stocks rebounded to halt a five-day rout. The countries are the world’s biggest metals consumers. Zinc surged the most since June 2012, copper climbed more than 4 percent and aluminum and nickel advanced.

The Bloomberg Industrial Metals Subindex jumped as much as 4 percent on Thursday, the biggest intraday gain since May 2013. The gains are helping the measure to recover after tumbling 16 percent over the past three months, the steepest loss since 2011. Prices also climbed on signs that miners will start cutting back output, helping to alleviate concerns about oversupply. Freeport-McMoRan Inc. shares posted a record gain as the largest publicly traded copper producer unveiled plans to reduce production.

“There’s a chance that we’ve already seen the bottom in prices,” Phil Streible, a senior market strategist at RJO Futures in Chicago, said in a telephone interview. “It looks like China is going to make every effort that it can to help stabilize its stock market. Some bargain-hunters are coming and they’re purchasing commodities across the board. The U.S. GDP is great, and that’s helping as well.”

‘Demand Sentiment’

Zinc for delivery in three months climbed 3.6 percent to settle at $1,752 a metric ton Thursday on the London Metal Exchange. Prices rose as much as 4.4 percent, the most since June 29, 2012.

“We’re a little bit less worried about global growth concerns,” Mike Dragosits, a senior commodity strategist at TD Securities in Toronto, said in a telephone interview. “We’re rallying on the back of better demand sentiment.”

On the Comex in New York, copper futures for December delivery advanced 4.2 percent to settle at $2.3285 a pound. On the LME, aluminum, nickel and lead rose, while tin fell.

Freeport lowered its annual copper-sales forecast by 150 million pounds in 2016 and 2017. Shares rose as much as 32 percent, the biggest intraday advance in 20 years of trading. After the market closed, billionaire activist investor Carl Icahn disclosed a new activist stake in Freeport-McMoRan and intends to hold talks with the company on spending, a filing showed Thursday.

The Bloomberg World Mining Index gained 5 percent, the biggest one-day advance since October 2011.