Zinc Rises Most in 2 Weeks in London as China Builds Stockpiles

By Claudia Carpenter

Feb. 25 (Bloomberg) -- Zinc climbed the most in two weeks on the London Metal Exchange after China’s stockpiling agency bought metal from domestic smelters, reducing supply.

The State Reserve Bureau bought 100,000 metric tons, taking purchases this year to 159,000 tons, said four people familiar with the transactions who declined to be identified. Purchases will total 300,000 tons, one said. Zinc has dropped 55 percent in the past year. Supply exceeded demand by 195,000 tons in 2008, according to the International Lead and Zinc Study Group.

“The government is using relatively low prices to purchase metal they will need during the next few years,” said Michael Widmer, an analyst at BNP Paribas SA in London. “They’re trying to help some of the smelters to survive.”

Zinc for three-month delivery jumped as much as $31.75, or 2.9 percent, to $1,142.75 a ton on the LME, the biggest intraday gain since Feb. 9. The contract was at $1,128 a ton at 2:45 p.m. local time.

The purchasing “should benefit the market overall” because it will “mop up excess supplies,” said Jan Altink, spokesman in London for Nyrstar NV, the largest zinc producer. Mining and smelter cutbacks have probably put the supply of zinc concentrate, used to make the metal, “roughly” in balance with demand this year after a surplus in 2008, he said.

China plans to remove 800,000 tons of aluminum capacity, 300,000 tons of copper capacity and 400,000 tons of zinc capacity as part of a stimulus package, the China Securities Journal said, citing people it didn’t identify. The government may also start to buy nickel to increase state reserves, the report said. The bureau also has bought aluminum and copper this year, according to Macquarie Group Ltd.

Canceled Warrants

Copper advanced $90, or 2.7 percent, to $3,375 a ton. The amount of the metal scheduled to be taken out of LME-monitored warehouses, known as canceled warrants, jumped to 30,375 tons, or 5.5 percent of inventories, from 3.3 percent yesterday. This suggests “some pickup in physical interest,” said William Adams, an analyst at BaseMetals.com in London.

“Sentiment” in metals was helped by gains for equities in Europe and Asia, Widmer said. The U.K. benchmark FTSE 100 Index jumped as much as 1.8 percent, and Japan’s Nikkei 225 Stock Average closed 2.7 percent higher in Tokyo.

Aluminum rose $4 to $1,333 a ton, and tin jumped $275 to $10,800 a ton. Nickel climbed $125 to $9,925 a ton, while lead gained $25 to $1,020 a ton.

To contact the reporters on this story: Claudia Carpenter in London at ccarpenter2@bloomberg.net