Zinc Touches 35-Month High on Outlook as Aluminum in Bull Market

Jul 22, 2014 3:24 am ET

July 22 (Bloomberg) -- Zinc climbed to the highest price since August 2011 after falling inventory and an improving demand outlook spurred speculation that consumption will exceed supply. Aluminum reached a 16-month high.

Zinc for delivery in three months on the London Metal Exchange added as much as 1.5 percent to $2,370 a metric ton and was at $2,357 by 3:05 p.m. in Hong Kong. The metal is up 15 percent this year, the second-best performer among the six base metals on the LME. Aluminum extended gains to $2,036 a ton, the highest since February 2013, after entering a bull market yesterday amid bets that demand will outstrip supply.

LME inventories for zinc fell for a 16th day to 656,675 tons yesterday, the lowest since December 2010, according to bourse data. Global demand for refined zinc will surpass output by 253,000 tons next year, expanding from an 85,000-ton deficit this year, according to Bank of America Merrill Lynch.

“For zinc, there’s been a decline in inventory levels and obviously the markets have been watching that,” David Lennox, a resource analyst at Fat Prophets, said by phone from Sydney. As China’s hard landing is unlikely to occur, “we will probably see those base metal prices rally away to some extent.”

Manufacturing in China, the world’s biggest user of industrial metals, probably expanded this month at the fastest pace since March last year, according to the median estimate in a Bloomberg survey before a preliminary Purchasing Managers’ Index due July 24 from HSBC Holdings Plc and Markit Economics.

Copper in London rose 0.3 percent to $7,046 a ton, a second day of gains. In New York, futures for September climbed 0.4 percent to $3.2095 a pound, while the metal for the same month advanced 0.7 percent to close at 49,890 yuan ($8,040) in Shanghai.

On the LME, nickel and lead also climbed, while tin was little changed.

--With assistance from Jae Hur in Tokyo.