Make Kitco Your Homepage

METALS-Zinc retreats from decade high, inventory fall supports

Kitco News

* LME/ShFE arb: (Adds official prices)

By Zandi Shabalala

LONDON, Oct 5 (Reuters) - A rally in zinc prices ran out of steam on Thursday after hitting a 10-year high, although the metal found support from declining inventories and strong demand.

Benchmark zinc on the London Metal Exchange failed to trade in official rings and but was bid 0.2 percent lower at $3,294 per tonne. The price of the metal, used to galvanise steel, on Wednesday touched its highest since August 2007 at $3,308.75 and is up 28 percent to far this year.

"After the recent strong rally it's normal for the price to find itself under pressure," Commerzbank's head of commodities research Eugene Weinberg said, adding that profit-taking could continue because zinc had risen too far.

"We have been positive on fundamentals of zinc at lower prices but now those factors are already priced in so we don't see upside potential from current levels," he said.

CHINA DEMAND: China has been curbing domestic output of industrial materials, primarily from ageing plants and mines, that are expected to result in higher demand for imports. STOCKS: Stocks of zinc dipped, indicating a shortage of supply was still a supporting factor. Zinc stocks in LME-approved warehouses are down 45 percent over the last year. DOLLAR: Putting pressure on zinc and other commodities, the dollar firmed versus a currency basket, making dollar-priced metals costlier for non-U.S. investors.

CHINA IMPORTS: China's zinc imports, at 65,609 tonnes in August, are up nearly 160 percent over the same month last year. But the year-to-date total at 314,086 tonnes is down nearly 6 percent. LEAD: Benchmark lead was traded 0.2 percent lower at $2,556 a tonne. In the previous session, the metal, used to make batteries, rose to $2,620.50, its highest since August 2011. The environmental crackdown in China has also reduced supplies of lead, which is mined alongside zinc.

PHILIPPINES: Philippines confirmed Roy Cimatu as the new environment minister but it was still unclear whether Cimatu would support the crackdown on the country's mainly nickel mining industry. Benchmark nickel was bid at a steady $10,600 per tonne. In nickel technicals, resistance was around $10,840 a break above that opens up potential for $11,040, Marex Spectron's Alastair Munro said.

OTHER METALS: Three-month copper traded up 0.5 percent at $6,555, while aluminium was off 0.9 percent to $2,147. Tin was bid 0.7 percent higher at $20,900 after earlier touching its highest since January at $21,180.

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Top Base and Precious Metals Analysis - GFMS LME/ShFE arb ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Additional reporting by James Regan in Sydney; editing by Alexander Smith and David Evans)

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

Precious Metal Charts

Follow Kitco News