Weekly Commodities Wrap: Zinc Surges To Fresh 3 Month Highs

Copper: Weaker US Dollar & Mining Strikes Keep Red Metal Supported

The red metal climbed higher over the week boosted by weakness in the US Dollar but also by other fundamental factors. Adding further support for the industrial metal was the reported halt in the recent build-up of Copper inventories that has been hanging over price since late June. The final factor was the approval this week of a workers’ strike at a mine in Chile.

The strike is taking place at the Zaldivar mine owned by mining group Antofagasta and was approved on Monday after talks between workers and the company broke down. The voting has not been officially completed though union officials say that the vote count so far makes a strike certain. Ahead of the workers leaving the site, there will be a period of government mediation which is set to take up to five days. Another of Antofagasta’s sites at Centinela is currently in the government mediation period. The two mines combined produced a total of 340,000 tonnes of copper in 2016, so a combined outage wold have a significant effect on the market.

The copper mining environment in Chile is contributing to the likelihood of further strikes with recent pro-worker labour laws encouraging the workers and subdued Copper prices meaning that contract offers are not as appealing as previously.

Copper continues to frustrate directional traders as the year-to-date range persists. Main support is situated at the December 2016 low around 2.450 with deeper support sitting on top of the mid-2016 highs around 2.274. To the topside, the key barrier will be a retest of the 2015 high around 2.955 which coincides with the bearish trend line running from 2011 highs.

Iron: Rally Continues On Strong Chinese Steel Market

Iron price exploded higher once again this week to breach recent highs as continued strength in Chinese steel markets sees price remain supported. Alongside strength in steel markets, there has also been a decline in inventories with Chinese rebar inventories at 3.74 million, sitting just above the recent six-month low. The first half decline was driven reduced construction activity over Spring. Overall, the rebound in Iron has been fuelled by restocking demand alongside high steel margins and a shortage of medium and high-grade iron. With the US Dollar also trailing lower it looks like conditions are right for the recovery to continue.