Zinc Rebounds From Longest Slump in 25 Years on Supply Outlook

Feb 05, 2014 2:31 pm ET

Feb. 5 (Bloomberg) -- Zinc rose in London, rebounding from the longest losing streak in 25 years, on speculation that strengthening demand in China will curb supplies.

Mitsui Mining & Smelting Co., Japan’s top zinc producer, raised annual charges to overseas buyers by as much as 70 percent amid rising Chinese consumption, compared with a 15 percent gain last year. China’s imports of zinc concentrate climbed 24 percent in December from a year earlier, customs data show.

A global production deficit will widen this year to 120,000 metric tons, from 20,000 tons in 2013, Morgan Stanley said in a Jan. 22 report, forecasting a 10 percent gain in the average cash price. Zinc stockpiles at warehouses monitored by the London Metal Exchange shrank 30 percent the past 12 months.

“China is the biggest consumer of everything including metals,” Michael Smith, the president of T&K Futures & Options Inc. in Port St. Lucie, Florida, said in a telephone interview. “Any time they’re buying, that’s always a bullish factor because it reduces supply.”

Zinc for delivery in three months climbed 0.8 percent to settle at $1,968 a ton at 5:50 p.m. on the London Metal Exchange. Prices slumped 6.6 percent over 10 sessions through yesterday, the longest run of losses since at least January 1989, according to data compiled by Bloomberg. Markets in China are closed through tomorrow for the Lunar New Year holiday.

The premium suppliers charge buyers in Shanghai for immediate delivery of zinc rose 38 percent to $172.50 a ton in February from a year earlier, data from Metal Bulletin show.

Belgium and the Netherlands joined Spain among the top 10 suppliers to China last year, indicating higher Asian premiums were enough to cover shipping costs from Europe, Osamu Saito, a general manager at Tokyo-based Mitsui Mining, said in an interview yesterday.

Copper for delivery in three months fell less than 0.1 percent to $7,039 a ton ($3.19 a pound) in London. On the Comex in New York, futures for delivery in March lost 0.1 percent to $3.1885 a pound.

Aluminum, lead and zinc advanced in London. Nickel and tin fell.

--With assistance from Jae Hur and Ichiro Suzuki in Tokyo. Editors: Joe Richter, Patrick McKiernan