Industrial Metals Climb on China Optimism, U.S. Low-Rate Outlook

Updated on
  • Lead and zinc advance on positive China economic outlook
  • Weak macroeconomic data from U.S. indicates low rate to last

Industrial metals advanced on speculation that China is capable of maintaining its growth, supporting demand in the top user, while data from the U.S. indicated interest rates may remain lower for longer.

Zinc, which entered a bull market this week, rose as much as 2.3 percent to $1,795 a metric ton on the London Metal Exchange and traded at $1,770.5 at 3:55 p.m. in Shanghai. Lead gained 1.5 percent. Metals remained higher even after Shanghai’s stock market, which slumped by the most in a month after money-market rates jumped.

Metals prices have been hurt over the past 12 months as growth in China slowed, prompting some suppliers to cut back. China will set up a fund for industrial restructuring to curb the sector, the government said on Thursday. The country is able to increase its budget deficit to 4 percent of gross domestic product to boost the economy, central bank officials wrote on the Economic Daily’s website.

“Bearish sentiment on economic growth has been weakening in the world especially in China, giving support to metals prices recently,” said Li Li, an analyst at Jinrui Futures Co. in Shenzhen. “Some fabricators in China have resumed production at high capacity after the holiday while more are expected to join,” Li said, referring to businesses resuming output after the Lunar New Year break.

On Wednesday, Markit Economics reported the worst reading on U.S. service-sector activity since 2013, while separate data showed new home sales fell more than previously forecast. The data add to the case for central bank policy makers delaying further increases in U.S. borrowing costs, potentially bolstering raw materials demand.

— With assistance by Alfred Cang

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