Zinc prices at 8-month high on shrinking stocks

LONDON — Zinc prices held close to an eight-month high on Wednesday as sinking stocks of the metal on the London Metal Exchange (LME) market fueled supply concerns even as inventories grew elsewhere.

Inventories of zinc in warehouses certified by the LME touched 58,950 tons, their lowest since October 2007.

This boosted the premium for cash zinc over the three-month LME contract to $52 per ton on Tuesday, its highest since Jan. 8.

“Tightness on the LME seems to be playing into higher prices, even though there is a reasonable amount of stock in China which suggests that the global market is not as tight as the LME is,” said Capital Economics analyst Ross Strachan.

Benchmark zinc closed up 0.4% at $2,848 a ton after earlier reaching its highest since July at $2,848.50. The metal is the second best performing base metal this year, up 15% after shedding 26% in 2018.

Zinc stocks in warehouses monitored by Shanghai Futures Exchange (ShFE) are above 117,000 tons, according to latest data. That, combined with more than 82,000 tons in Shanghai bonded warehouses, takes the total to near 200,000 tons.

The pace of stock gains on ShFE has been quicker than most would have expected, according to analysts at GFMS Refinitiv.

LME broker Marex Spectron estimates speculators held a collective net long position of five percent of open interest last Friday from 9.3% in early February.

The global zinc market deficit narrowed to 28,000 tons in January from a revised deficit of 62,400 tons in December, data from the International Lead and Zinc Study Group showed.

Zinc prices have also been bolstered by the large position held by one party, which controls 50-79% of available LME zinc inventories, according to LME data.

FloodsinAustralia’sQueensland state last month have disrupted rail delivery of zinc exports to the northern port of Townsville, affecting miners, including Glencore, MMG Ltd. and South 32.

Aluminum ended up 1.8% at $1,906 a ton after Norway’s Norsk Hydro said production at its Neuss plant in Germany would likely fall by 10,000-20,000 tons due to an accident. Copper did not trade at the close but was bid unchanged at $6,472 a ton. Lead gained 2.1% to $2,129.50; nickel rose 0.8% to $13,210’ and tin was bid down 0.8% at $21,150. —