Zinc at Six-Month High, Poised for Longest Rally Since January

By Glenys Sim

April 15 (Bloomberg) -- Zinc advanced for a fourth day to the highest level in six months on speculation demand is increasing in China, the world’s largest producer and consumer of the metal used to galvanize steel.

Stockpiles in Shanghai warehouses dropped last week for a third week to 73,318 metric tons, according to exchange data. The global surplus of zinc, the third-best performer on the London Metal Exchange this year, narrowed in February, according to an International Lead and Zinc Study Group report.

“We’re getting anecdotal evidence of orders picking up in recent weeks, and this has given the bulls a reason to push prices higher,” Shenzhen Rongtuo Trading Co. analyst Pang Ying said today. Three-month delivery zinc jumped as much as 1.5 percent to $1,462 a ton, the highest since Oct. 14, and traded at $1,452 at 11:14 a.m. Singapore time, heading for the longest rally since January.

Zinc for July delivery on the Shanghai Futures Exchange gained as much as 4.2 percent to 13,300 yuan ($1,946) a ton, before trading at 13,220 yuan.

China’s imports of refined zinc outpaced exports for a third month in February, according to customs data. March trade figures are expected to be released this week.

“China is the world’s largest producer of zinc and still remains a net importer as the widening spread between London and Shanghai prices encourages overseas purchases,” said Pang.

Premium Increases

The premium of Shanghai over London climbed to more than 1,000 yuan a ton this week, compared with this year’s low of around 300 yuan in March, according to data compiled by Bloomberg. Futures in China gained 33 percent this year, compared with 20 percent in London.

Reports of domestic stockpiling are helping support prices, Pang said. Hunan Nonferrous Metals Corp. plans to borrow 1.2 billion yuan ($176 million) from banks to help its units stockpile metals, the Hunan Daily reported yesterday. The country’s State Reserve Bureau has procured about 159,000 tons of zinc this year.

China’s Shaanxi province will buy 44,000 tons of zinc from local producers for stockpiling, researcher CBI China Co. said March 19, while Chenzhou in China’s Hunan province plans to store 50,000 tons of zinc this year to support local industry amid the global economic crisis.

Among other LME-traded metals, copper was little changed at $4,705 a ton and aluminum was unchanged at $1,513 a ton. Lead fell 0.7 percent to $1,475, nickel lost 0.8 percent to $11,750 a ton, while tin climbed 0.2 percent to $11,025 at 11:08 a.m. in Singapore.

To contact the reporter on this story: Glenys Sim in Singapore at Gsim4@bloomberg.net