LME Zinc Stocks Continue to Fall

Base Metals

Copper: Copper prices are higher as hopes that the US government shutdown could end today lifted sentiment. Benchmark three-month copper on the LME rose 0.2% to $10,853 earlier in the morning. Markets are also awaiting new bank loan issuance data from China, which is expected to have slowed down significantly. Chinese banks are expected to have issued around 500 billion yuan ($70.20 billion) in net new yuan loans last month, down from 1.29 trillion in issuance in September. Loan issuance is used as an indicator of metals demand.

China’s central bank said on Tuesday it would maintain “appropriately loose” monetary policy conditions, while Beijing unveiled new policy measures aimed at improving private capital investments in infrastructure projects. Investment in the private sector shrank 3.1% in the first nine months of this year, as trade tensions with the US and a real estate downturn weighed on business sentiment. China’s October data showed easing producer price deflation and a slight rebound in consumer prices. The PPI fell 2.1% year-on-year, less than the expected 2.2% drop, marking its 13th straight month in negative territory. NBS attributed the improvement to capacity management in key industries. Meanwhile, CPI rose 0.2%, reversing two months of declines and beating forecasts for no change. The figures indicate the government efforts to rein in excessive competition have helped stabilize prices to a degree; however, weak consumer demand remains a worry.

On the supply front, Chilean state-run miner Codelco announced that production fell more than 7% in September, while production at BHP’s Escondida mine, which is the world’s largest copper mine, rose almost 17%. At Collahuasi, another major copper mine jointly run by Glencore and Anglo American AAL, output fell 26%.

Zinc: Zinc was down 0.3% at $3,058. Zinc stocks in LME-registered warehouses are near their lowest since February 2023 at 35,875 tons. Low stocks have created a premium for the cash zinc contract over the three-month forward. This would normally attract metal to the exchange. However, shortages on the physical market have prevented this from happening. Zinc stocks in warehouses monitored by the Shanghai Futures Exchange have also fallen. Stocks are down 8% over the past couple of weeks at 100,208 tons.

Aluminum: Aluminum gained 0.5% to $2,887.

Tin: Tin added 0.8% to $36,900.

Lead: Lead rose 0.4% to $2,072.

Nickel: Nickel was up 0.1% at $15,060.

Precious Metals

Gold: Gold prices moved higher as markets prepared for a House vote on a deal to end the government shutdown, which will allow for the release of official economic data. Bets of a December rate cut were upped on Tuesday following the release of ADP weekly payroll data, which estimated that employers shed an average of 11,250 jobs per week in the four weeks to October 25. However, Fed Funds futures are now pricing a 65.4% chance that the Fed will cut rates in December, down from 68.5% at this time yesterday. Gold is likely finding support from bets that the release of delayed US data will boost rate cut prospects from the Fed.

Fedspeak remains mixed, creating a complicated situation for Fed Chair Powell following two rate cuts earlier this year. Fed members have been increasingly divided over the interest rate path, as the shutdown has pushed hawks to pause rate cuts, while doves continue to press for a reduction in policy. There will be a host of Fed speakers today, which could offer further insight into how the Fed will move come December. Fed Governor Stephen Miran on Monday suggested that a 50 bp cut might be appropriate for December, while other policymakers have said they remain worried about services inflation and that they view the current interest rate as closer to neutral.

Continued central bank purchasing of gold will continue to provide underlying support to prices.

Silver: Silver futures rose 2% to over $51.

Platinum: Platinum is little changed at $1,599.

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