Zinc prices sped lower during early LME trading Tuesday as the market sliced through putative support levels with ease as sellers and lenders of the spread dominated.
Other metals were not moving to the same extent as zinc. Monday's high-fliers, copper and nickel, looked to consolidate those advances. "Zinc has been given a serious old bashing. There has been lending on the spreads and the averages, and lots of stop-loss selling," one trader said.
Three months prices slumped from early levels of $1,424 down to $1,358 before settling at $1,372, down a hefty $51 from Monday's kerb close. The cash/threes backwardation narrowed in from early levels of $130 to straddle $100.
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On Monday, this benchmark spread was at $160/170, and had been as high as $270 last week.
Other traders said banks and commission houses were the main sellers and lenders, suggesting that many of the longs had now opted to liquidate with the squeeze perhaps about to evaporate.
Also, the LME stepped up monitoring activities over the last few days. On Friday, it called in dealers' cards and from October 1, the large position reporting limit will be halved.
And from Wednesday, the LME will report its warehouse stocks by differentiating between metal where warrants have been cancelled but not delivered out of the warehouse.
"All this is finally having an affect although it is a bit bizarre as the stocks are still going down," the trader said.
Prices elsewhere drifted back in less active trading but remained close to Monday levels.