Zinc slumps as steel prices fall ahead of Chinese data

LONDON: Zinc prices slid on Tuesday, pressured by a fall in Chinese steel prices and ahead of expected weaker Chinese data as well as a possible increase in US interest rates.

"We expect the May China data to extend the downturn that began in April and would have negative implications for metals," said Caroline Bain, chief commodities economist at Capital Economics in London.

"We haven't seen any signs from the (Chinese) authorities that they're looking to stimulate the economy. They're trying to rein in credit growth, they're trying to curb excessive behaviour in the property market, which is very bad news for metals."

The data on Chinese retail sales, industrial growth and urban investment is due on Wednesday and consensus forecasts are weaker for all three.

The US Federal Reserve is widely expected to raise its benchmark interest rate in a decision scheduled for Wednesday, but this is largely priced into the market, Bain added.

LME ZINC: London Metal Exchange zinc was the biggest decliner on the market, falling 1.6 percent to trade at$2,454 a tonne in official open outcry activity, extending a similar drop in the previous session.

ZINC: Premiums for zinc held in China's bonded zones have surged to $195-$205 from $155 last week <ZN-BMPBW-SHMET>. Signs of supply stress also showed on the Shanghai Futures Exchange (ShFE), where front month prices flaring to more than 2,000 yuan above the third month futures contract on Monday.

ZINC: Industry sources said that shorts on the front month ShFE were being forced to cover their positions. Since ShFE accepts mostly Chinese brands for delivery against its front month futures contract, the spillover effect into LME may be limited, they said.

CHINESE STEEL: Zinc, mainly used for galvanising steel, was pressured after China's rebar futures fell more than 3 percent on Tuesday in their sharpest single-day drop since early May. Investors worried that a slowing property market may dent steel demand in the world's top consumer.

COPPER: LME copper shed 1.4 percent to trade at $5,692 in official rings.

COPPER DEMAND: The growing number of electric vehicles hitting roads is set to fuel a nine-fold increase in copper demand from the sector over the coming decade, according to an industry report on Tuesday.

ALUMINIUM: LME aluminium dipped 0.3 percent to trade at $1,883 in official activity. Alastair Munro at broker Marex Spectron said after breaching last week's low of $1,887, the next support level is $1,862.50, the low from May 12.

"Marex data analysis shows yesterday's supply was the heaviest since the 8th May which was on that move down to that low," he said in a note.

PRICES: LME nickel, untraded in rings, was bid down 0.1 percent at $8,780, lead was bid 0.2 percent firmer at $2,059 and tin was bid up 0.4 percent at $19,125.