September 25, 2017 / 12:36 PM / a month ago

METALS-Nickel and zinc rebound, China demand worries cap gains

* LME/ShFE arb: bit.ly/2wZSAEz (Updates with closing prices)

By Peter Hobson

LONDON, Sept 25 (Reuters) - Zinc and nickel rose on Monday after steep falls late last week and copper prices stabilised, but gains were limited by caution over the demand outlook from top metals consumer China and a stronger U.S. dollar.

“We are trying to establish floors now that we are down from recent highs,” said Robin Bhar, head of metals research at Societe Generale.

“We are back at what people would perceive as closer to fair value so we should be bottoming out,” he said.

ZINC: Three-month zinc on the London Metal Exchange closed up 2.1 percent at $3,096 a tonne, having dropped to a one-week low of $3,000 on Friday.

SPREAD: Tight supplies of immediately available metal raised the premium of cash zinc to the three-month contract MZN0-3 to its highest since 2007 at $66, which traders said was likely to encourage deliveries into LME warehouses.

WARRANTS: On-warrant stocks of zinc available to the market in LME-registered warehouses have fallen by more than 50 percent this year, with a small number of entities holding most warrants. MZNSTX-TOTAL <0#LME-WHC>

CHINA DEMAND: New measures to slow home sales and a downgrade of China’s long-term sovereign credit rating last week have dampened expectations of Chinese demand for metals.

CHINA SUPPLY: Closures of polluting smelters have supported prices, with cities in Anhui province the latest to issue plans to curb production in the steelmaking, non-ferrous smelting, cement and coal-fired power sectors.

GERMANY: Business confidence in Germany deteriorated unexpectedly in September, suggesting the economy could lose some momentum.

DOLLAR: Expectations of a rise in U.S. interest rates in December could strengthen the dollar, weakness in which has fuelled demand for metals this year by making them cheaper for holders of other currencies.

KOREA: Some banks are paring back credit lines to smaller trading firms holding industrial metals in South Korea because of escalating tensions over North Korea, sources said.

DISCOUNTS: Traders said worries over stockpiles in South Korean warehouses had driven up discounts of cash nickel, copper and aluminium to their three-month contracts. The discounts are near multi-year highs. MNI0-3 MCU0-3 MAL0-3

SPECULATORS: Hedge funds and money managers cut their net long position in COMEX copper in the latest week.

NICKEL: LME nickel finished up 1.5 percent at $10,580 a tonne after falling more than 8 percent over Thursday and Friday, when the Shanghai Futures Exchange raised trading fees to curb speculative investment.

COPPER: LME copper ended 0.1 percent lower at $6,450. On Friday it touched $6,366, the lowest since Aug. 16.

PRICES: Aluminium closed down 0.5 percent at $2,148 a tonne, lead finished 0.3 percent lower at $2,475 and tin ended 0.9 percent higher at $20,700.

Additional reporting by Melanie Burton; Editing by David Goodman and Mark Potter

Our Standards:The Thomson Reuters Trust Principles.
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