Metals ended mixed in subdued midsession trade on the London Metal Exchange (LME) yesterday. Zinc made further gains in the rings following on from a fund buying rally on Monday, and dealers said they expected this trend to continue.
Those caught short of zinc continued to pay $14/15 on "Tom/next", or belated borrowing against Monday's cash rate, and $12 and $14 for cash/day. Cash/threes spreads widened to $260 backwardation in the kerb, while October/threes was $142. "With the back as high as it is, you would expect significantly higher lending.
But it's just not happening, which has left a lot of the market quite nervous," said a floor trader. Stocks rose by 1,675, well short of market expectations, including 1,750 tonnes into Singapore and 1,000 out.
Zinc ended the kerb at $1,465, up $20 in thin trade. Tightness is also creeping up on aluminium, with pressure focused on November and spilling over into December, dealers said. Aluminium flipped into a $1/2 backwardation in the first ring before ending the kerb at $6 contango. Traders said they were still mystified by the $5 limit on the aluminium backwardation and many called for more uniformity in the LME rule book.
"There's just no consistency. The zinc shorts are getting hammered while the aluminium market has different rules altogether," said a trader.
Copper took a knock from a 5,325-tonne stock rise, falling to a low of $2,092 in the first ring before closing at $2,102. Dealers said any upside gains would be based on speculative buying.
