Best Run in 11 Years Beckons for Metals as China Drives Rally

  • Nation’s supply-side reforms, pollution curbs aiding prices
  • Copper surges to highest since November 2014; zinc rises

Barclays Analyst Says He Is Still Cautious on Copper

Industrial metals including copper and aluminum are heading for the longest run of weekly gains in London in more than a decade on investor optimism driven by China, with demand holding up in the largest user just as policy makers press on with reforms that should curb supply.

The LME Index climbed 2.4 percent in the four days since Monday, and if the advance sticks, the gauge will cap a seventh weekly increase. That would be the longest rally since a nine-week run in 2006, before the global financial crisis from which industrial commodities have since struggled to fully recover. The index, as well as copper, are both at the highest level since 2014.

Investors have piled into aluminum amid signs that China’s measures to cut capacity and sharpen environmental controls will tighten supply, while zinc has benefited from indications that falling mine output is driving the market deeper into deficit. Citigroup Inc. this week boosted its outlook for a sweep of metals, saying markets had been surprised by China’s tough execution of the reforms. Antofagasta Plc told Bloomberg TV that the Chilean copper producer doesn’t see any reason why the good times won’t continue.

“The intensity of China’s supply-side reforms being applied over the past couple of months has given the market confidence that already constrained supply dynamics will tighten further through the rest of the year,” Nicholas Snowdon, a metals analyst at Standard Chartered Bank, said by phone from London. “Supply across the majority of metals has been in a marked deceleration so far this year, even in an environment of stronger prices and wider margins for producers.”

Among the standouts this week:

  • Copper hit $6,747 a metric ton on the London Metal Exchange, the highest price since November 2014. The metal is on course for a seventh straight weekly rise, and traded at $6,721 at 10:57 a.m. in London.
  • Aluminum rose to $2,122.50 a ton on Thursday, the most expensive since February 2013, and it’s the top gainer among the six main metals this year with a 24 percent climb. It was last at $2,098 a ton.
  • Zinc spiked to a decade-high of $3,231.75 a ton on Wednesday, while nickel rallied to $11,825 a ton, the highest since November.

— With assistance by Martin Ritchie, Mark Burton, and Jasmine Ng

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