Shortages fuel zinc's climb towards 7-month highs

LONDON: Zinc prices rose on Monday, towards seven-month highs hit last month, on worries about shortages ahead of the seasonally strong demand in top consumer China and tumbling stocks.

Benchmark zinc on the London Metal Exchange was up 1.5 percent at $2,752 a tonne at 1148 GMT from an earlier $2,778.50. Early last month prices of the metal used to galvanise steel touched $2,810, the highest since July.

"The market is worried about a shortfall, though supplies should be rising this year," said Commerzbank analyst Daniel Briesemann. "The other aspect is low stocks."

ZINC MARKET: Analysts expect the zinc market to see a deficit for the fourth year running in 2019. Zinc prices are up about 11 percent so far this year.

Data from the International Lead and Zinc Study Group (ILZSG) showed a zinc market deficit of 384,000 tonnes last year and shortfalls of 442,000 tonnes and 128,000 tonnes respectively in 2017 and 2016.

DEMAND: China accounts for nearly half of global demand, estimated at around 14 million tonnes this year.

An environmental crackdown in the top producer saw its zinc output fall to 5.68 million tonnes last year, down 3.2 percent from 2017.

The second quarter is typically the strongest for industrial metals demand as companies stock up ahead of construction activity between July and September.

STOCKS: Inventories of zinc in LME approved warehouses at 59,450 tonnes are at the lowest since Oct. 2007.

RELIEF: Worries about a tight LME market were exacerbated by large holdings of zinc warrants and cash contracts, which pushed the premium for the cash over the three-month contract to above $36 a tonne on March 1.

But that premium has eased to near $12 a tonne as these holdings have been cut back.

ALUMINIUM: Some Japanese aluminium buyers have agreed to pay a premium of $105 per tonne for shipments in April to June, reflecting higher local spot premiums, four sources directly involved in the pricing talks said.

COPPER: Market focus is also on stocks of copper in LME warehouses, which at 113,525 are at their lowest since 2008. Concerns about a tight LME market have also created a premium for the cash over the three-month contract

PRICES: Copper was up 0.1 percent at $6,403 a tonne, aluminium fell 0.7 percent to $1,859 a tonne, lead  rose 0.2 percent to $2,096, tin lost 0.7 percent to $21,215 and nickel slipped 0.3 percent to $13,050.