Metals Jump as China Weighs Support Measures, Output Cuts

  • China considering short-selling probe, state purchases
  • Measures spur short-covering as U.S. shut for holiday: RBC

Industrial metals rallied as China considered measures to support prices near the lowest in years, including state purchases, output cuts and a probe into short-selling.

The country’s largest copper and nickel suppliers plan to meet this week to weigh their response to the rout, according to people with knowledge of the matter. That’s after zinc suppliers pledged last week to reduce output to boost prices. Authorities are also said to be considering state purchases to support the metals as well as possibly intervening to limit futures short selling.

Government buying may have “a positive impact in the immediate aftermath," Caroline Bain, a commodities economist at Capital Economics Ltd. in London, said by phone. Though if the market thinks “that they’re just creating higher stocks, that could be negative for prices in the medium term. Everyone now is just looking for signs of output cuts, not stockpiling."

Zinc for delivery in three months climbed 2.1 percent to $1,611.50 a metric ton by 5:18 p.m. on the London Metal Exchange. Nickel earlier gained as much as 4.7 percent and copper advanced as much as 4.2 percent, the most in almost seven weeks.

A gauge of industrial metals is near the lowest in six years as a slowdown in China, the world’s biggest user, cut demand and added to oversupplies. The planned meeting in Shanghai will include representatives of refined producers as well as nickel pig iron makers, according to people familiar with the plan.

The China Nonferrous Metals Industry Association asked the National Development and Reform Commission to make purchases of nickel, aluminum and other metals to support prices and reduce the glut, according to other people who asked not to be identified. Regulators have begun to collect some records of trading activity following a request from the group.

The news about potential stockpiling has spurred holders of bearish bets to make purchases to close out their positions, according to RBC Capital Markets Ltd. Trading volume should be limited as U.S. markets will be shut Thursday for the Thanksgiving holiday, it said.

"The market is bearish," Leon Westgate, an analyst at ICBC Standard Bank Plc, said in an e-mailed note. "However, some of the negativity seems a little overdone, with difficult trading conditions, particularly for the physical trading community, clouding the picture."

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