(MB) Base metals prices on the Shanghai Futures Exchange were broadly up during Asian morning trading on Thursday September 6, with zinc and copper pulling the rest of the complex higher. Lead and tin bucked the general strength, with both metals’ prices undergoing a correction following recent gains. Zinc was the outperformer of the SHFE complex this morning, with the metal benefitting from a backdrop of tightening availability, reflected in lower stock levels and reduced domestic mine production in China. Zinc’s most-traded October contract on the SHFE stood at 21,080 yuan ($3,084) per tonne as at 10.14am Shanghai time, up by 365 yuan per tonne or 1.8% from Wednesday’s close. “In China, [zinc] availability remains tight after domestic mine production dropped 8.6% in the first half of 2018 due to closures following strict environmental inspections. Chinese smelters have cut production as a result; production totaled 439,000 tonnes in July, down 3.5% year on year, according to the latest data from China’s National Bureau of Statistics,” Metal Bulletin analyst Andy Farida said.As a result, consumers are turning to exchange inventories for their needs, Farida added. Deliverable zinc stocks at SHFE warehouses totaled 29,936 tonnes on August 31, the lowest since October 2007. Stocks are down 86% from the beginning of the year, when stocks totaled 207,163 tonnes on August 8.

“Zinc inventories are really low right now, which is supporting the price firmly. Smelters were not willing to expand their production unless the price of zinc went up to 22,000 yuan per tonne. This has exacerbated the situation of low stocks,” an analyst with Guotai Junan Futures told Metal Bulletin.
Copper also recorded relatively strong gains, finding support from news that Zijin Mining Group had acquired copper miner Nevsun Resources, which the market took to mean that China’s appetite for the red metal remains strong, according to ANZ Research.

Low exchange inventories are also providing those in the copper market with some positivity this morning; SHFE copper stocks totaled 138,001 tonnes on August 31, which is down 55% or 169,434 tonnes from the 307,435 tonnes recorded on March 23.

In response, the most-traded October copper contract on the SHFE rose 220 yuan per tonne to 47,730 yuan per tonne compared with Wednesday’s close.

Providing further support to the complex as whole was the continued retreat in the dollar index; the index dipped 0.11% to 95.0 as at 10.14am Shanghai time, this compares with a reading of 95.34 at roughly the same time on Wednesday.

Lead and tin bucked the general show of strength in early session on Thursday with both metals correcting downward following recent price gains this week.