Lower Zinc Supply Sparks Demand

Base Metals

Copper: Copper prices at the London Metals Exchange rose to 16-month highs on Thursday as worries about supply shortages and a lower dollar prevailed over weak demand prospects from China. Benchmark copper on the LME traded near $10,479 a ton from an earlier $10,520.5, the highest since May last year, when the metal hit record highs above $11,100 a ton. Freeport-McMoRan’s Grasberg mine in Indonesia remains suspended after a deadly mudslide on September 8, while disruptions at other large mines, including the Kamoa-Kakula in the Democratic Republic of Congo and Codelco’s El Teniente mine in Chile, have weighed on output. Copper output in Chile fell 9.9% year-on-year in August as Codelco reported losses of 33,000 tons of copper linked to the deadly collapse earlier this year and cut its 2025 guidance. Further adding to supply worries is a potential strike at Antofagasta’s Los Pelambres copper mine in Chile, where the union there rejected a new contract offer.

Factory activity shrank in much of the world last month; private surveys this week showed signs of slowdown in manufacturing growth, while the anticipated impact of President Trump’s tariffs added to pressure from weak Chinese demand. Data from China on Tuesday showed factory activity extended its decline into a sixth month, the longest slump since 2019. The official manufacturing purchasing managers’ index was at 49.8. It’s the first evidence that weakness in the world’s second-biggest economy persisted through the end of the third quarter. Markets in China are closed from October 1 to 8 for the National Day holiday. The lack of liquidity from the Chinese market could lead to increased volatility over the coming days.

ISM’s manufacturing purchasing managers index for the US increased to 49.1 from 48.7 in August, signaling that activity remained in contractionary territory for the seventh straight month, although at a slower pace than previously. The hiring category remained in contraction, with employers focused on reducing staff due to uncertain demand. Respondents also signaled they were more focused on tariffs dampening demand than on their causing inflation. Input prices eased slightly, although the gauge remained at historically high levels with the index slipping from 63.7 to 61.9. Survey respondents cited tariffs, high costs, and weak demand as key challenges, with many holding off on capital projects, cutting costs, and facing delayed orders, particularly in machinery, metals, and semiconductors.

Zinc: Zinc was up 1.1% at $3,020 after earlier hitting a nine-month high at $3,032 a ton, as the outlook of lower supply helped spark demand. The International Lead and Zinc Study Group noted that although mined zinc production rose 6.3% annually in the first half of 2025, bottlenecks in refiners drove output of refined metal to fall over 2%. Additionally, smelters in Kazakhstan and Japan have suffered from output curbs, while treatment charges have risen to $87.50, according to surveys from the Shanghai Metals Market. LME-registered zinc stocks have fallen 66% since mid-July to 40,350 tons since the beginning of the year. Available tonnage, excluding metal awaiting physical load-out, stands at just 30,625 tons. The premium for the cash contract over the three-month forward has surged to around $80 a ton compared with a $6 discount in July.

Aluminum: Aluminum climbed 0.6% to $2,704.5.

Tin: Tin advanced 0.8% to $36,300.

Lead: Lead rose 0.4% to $2,018.5. Recent data showed that lead inventories in warehouses monitored by the Shanghai Futures Exchange fell 15% from last Friday to their lowest level since February.

Nickel: Nickel added 0.6% to $15,280 a ton.

Precious Metals

Gold: Gold futures rose higher, as expectations of further interest rate cuts from the Fed, a weaker dollar, and political uncertainty due to the US government shutdown have provided the yellow metal with a strong tailwind. Gold notched another record on Wednesday, with spot prices hitting an all-time high of $3,895.09. Softer economic data out on Wednesday solidified expectations of an October rate cut from the Fed and boosted bets of a December cut as well. ADP’s employment data offered a surprise 32,000 decline in private-sector payrolls while also revising the previous month’s figures down sharply, resulting in three of the last four months showing negative job growth. Fed Funds futures have fully priced in a rate cut at the October meeting and nearly an 86% chance of another cut following in December.

SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, said its holdings rose 0.59% from Tuesday to 1,018.89 tons on Wednesday, their highest since July 2022.

Silver: Silver futures followed moves in gold after breaking 14-year highs earlier in the week. Silver continues to find support from expectations that the Fed will cut interest rates in October and December. The Silver Institute projected the silver market will end the year at a deficit for a fifth consecutive time as global output is expected to total 844 million ounces in 2025, 100 million ounces short of demand. China’s solar installation grew slightly in August as pricing reforms drove companies to front-load installations earlier in June, but solar cell exports from the country were last seen surging by 40%.

Platinum: Platinum futures moved higher, with US December contracts adding over 0.9% to $1584.

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