Copper prices hit a new high on Monday because of concerns about the availability of the metal and because of global inventories being near critically low levels. Zinc prices matched the record high set on Friday as traders worried about its diminishing stockpiles amid strong demand.
The three-month copper price touched $5,165.5 a tonne on the London Metal Exchange, exceeding the record set on Friday by $3. The fact that prices have held up above $5,100 after a $200 increase on Friday has given traders confidence that further record highs might be reached soon.
Traders said the sharp run in the past few sessions caught some investors by surprise, forcing them to cover short positions, or trades, to sell the metal.
“The rule in the copper market is don’t go short because it always goes up,” said one base metals trader at RBC Capital Markets.
Inventories at the three main commodity exchanges that trade copper, LME, Shanghai Futures Exchange and Comex, total about 200,000 tonnes – about four weeks worth of supply.
“If there was another major supply disruption, there would be plenty more upside in the price,” said the trader.
Zinc prices matched Friday’s record peak of $2,485 a tonne on the LME. Traders were keeping an eye on Xstrata’s plans to convert its McArthur River underground zinc mine in Australia into an open cut mine. The company has threatened to close the mine if Australian authorities do not approve its plans.
A base metals trader said the mine accounted for about two per cent of the global zinc concentrates market. “When supplies are already tight any further reduction in production would be felt,” he said.
Gold prices were steady at $554.30/$555.20 a troy ounce in early New York trade.
Silver prices hovered near their 22-year highs, trading at $10.33/$10.36 a troy ounce, down 10 cents from Friday’s 22-year peak.
Crude oil futures fell following strong gains last week, but the market remained concerned about the potential for further supply disruptions in Nigeria after attacks on a pipeline.
An ENI-owned pipeline was attacked at the weekend, further disrupting exports from Nigeria, which is Africa’s largest producer, and is already down 25 per cent in the past month. However, US stockpiles are near seven-year highs, which indicates there is plenty of crude oil available.
IPE Brent for May delivery fell $1 to $62.26 a barrel in late afternoon trade. April West Texas Intermediate fell $1.47 cents to $61.30 a barrel in early afternoon New York trade. The April WTI contract expires at the close of trade on Tuesday. May WTI dropped $1.20 to $63.00.