Copper prices edged higher on Friday and were on course for an eighth consecutive weekly gain as a surge in cancelled warehouse warrants on the London Metal Exchange (LME) raised concerns about shrinking readily available supplies.
Benchmark three-month copper on the LME rose 0.22 percent to $14,314.50 per metric tonne, taking its weekly advance to 0.7 percent. On the Shanghai Futures Exchange (SHFE), the most-traded copper contract gained 0.4 percent to 108,820 yuan ($16,191.77) a tonne.
The latest gains extend a powerful rally in the industrial metal, with traders increasingly focused on the availability of physical copper after a rise in requests to withdraw metal from LME-registered warehouses.
“Copper prices have been supported this week by another large increase in LME warrant cancellations,” said Craig Lang, principal analyst at information provider CRU.
LME warrant cancellations indicate that metal has been earmarked for withdrawal from exchange warehouses, potentially reducing the volume immediately available to the market.
Exchange data showed that copper stocks in LME-registered warehouses fell to 107,050 tonnes on Thursday from 166,775 tonnes a week earlier, reversing much of the increase caused by large inflows into warehouses the previous week.
The decline in visible inventories has heightened concerns over physical supply, particularly as copper flows between warehouses in London, Shanghai and the United States are being reshaped ahead of a potential US tariff on imports of refined copper.
The relocation of metal towards US warehouses has raised questions over how much copper will remain readily available to consumers in other markets, adding a supply-risk premium to prices.
Zinc supply tightness adds to metals rally
Zinc also received support from declining warehouse inventories, although price movements were mixed between the LME and SHFE.
LME zinc gained 0.73 percent on Friday, while the SHFE contract fell 0.3 percent.
The metal has been supported by evidence of tightening supply, even as increased Chinese exports have helped ease concerns about shortages outside China.
“LME inventories are low, and treatment charges remain deeply negative, highlighting tight concentrate supply and pressure on smelter margins,” analysts at ING said in a note.
Treatment charges, which smelters receive for processing mined concentrate, have fallen sharply as competition for limited concentrate supplies increases. Deeply negative charges indicate that smelters are under significant margin pressure and underscore constraints further up the zinc supply chain.
The tightness was also reflected in the LME’s cash-to-three-month spread. The contract moved into a sharp $231.75 per tonne backwardation on Thursday, a market structure in which nearby metal commands a premium over future delivery.
Mixed performance across industrial metals
Other LME base metals were mostly weaker on Friday.
Aluminium slipped 0.08 percent, lead declined 0.08 percent, nickel fell 0.14 percent and tin lost 0.12 percent.
Trading on the SHFE was more mixed, with aluminium rising 0.46 percent, lead gaining 1.06 percent and tin adding 0.61 percent, while nickel declined 0.38 percent.
