Dollar Strength Weighs on Copper and Zinc, But Zinc's Tight Supply Sends Warning Signals

Copper and zinc prices have slipped in recent days due to a strong US dollar. The greenback's strength has made industrial metals more expensive for non-US buyers, leading to decreased demand.

Zinc, however, is sending mixed signals. Despite the overall downturn, London Metal Exchange (LME) 'canceled warrants', a measure of deliverable inventory, have risen to 30,875 tons. This indicates that warehouse metal may soon be less available for delivery.

The zinc cash-to-three-month spread has also narrowed from $231.75 last Thursday to $139.35 a ton, implying buyers are paying up for immediate supply. However, the fact that this premium is narrowing suggests that the squeeze on inventory may be easing at the margin.