Aluminium and zinc prices rallied this week on fears of serious supply shortages in the near future. Traders expect 2006 to be extremely tight for both aluminium and zinc after news of declining inventories and diminishing output.
Fears of supply shortages were heightened by news of aluminium smelter closures in Europe in response to high energy prices as well as on expectations of lower exports from China.
Three month aluminium rallied on Friday to a new ten-year high of $2,039 a tonne on the London Metal Exchange, after breaching the $2,000 level on Wednesday.
Zinc hit a new eight-year high of $1,578 a tonne on investment fund and other speculative buying. However, the price of three-month zinc eased to close at $1,571.
Strong global demand for industrial metals and rising costs to run mines and develop new ones are expected to keep industrial metal prices at historically high levels for some time, a Reuters trader survey said on Thursday.
Despite the rally in aluminium and zinc, markets were not excited about all industrial metals.
“For the base metals as a group, sentiment is diverged: sentiment is only bearish on nickel and tin and neutral on lead and copper,” Neil Buxton, analyst at GFMS said.
Analysts said that copper’s high price was already detrimental for demand. According to some traders consumers are now buying only minimum amounts of the metal.
Copper touched $4,000 a tonne level on Friday, close to its record high, on news that LME copper inventories dropped 475 tonnes on day but eased to close at $3,992 a tonne. The metal has gained more than $800 this year.
Gold ended on Friday at $456.80/457.60 in late London trade, down $3.50 from $460.30/461.10 in New York on Thursday, and down $17 on the week. Earlier this week, bullion hit a seven-week low as the strong dollar prompted funds to sell the yellow metal.
Crude oil prices drifted towards three-month lows this week as demand decreased on forecasts for warm weather in the US and in Europe and as stockpiles of crude continued to accumulate. IPE Brent for December delivery was down 61 cents at $59.91 a barrel in late London trade, while the December West Texas Intermediate eased $1.20 to $60.58 a barrel in closing trade on the New York Mercantile Exchange.
Carbon dioxide emission allowance prices for 2005 dropped to their lowest level in three months at €20.85 on Thursday, with energy demand in Europe suffering from above-normal temperatures. The allowance prices however recovered on Friday to €21.30.
November frozen orange juice futures climbed this week, hitting a new seven-year high of $1.21 a pound on Friday. Orange juice futures have gained sharply after Hurricane Wilma had disrupted orange groves in Florida last month.
