LONDON: Zinc powered to its highest levels in more than 8-1/2 years on Friday on continued fund buying but analysts cautioned that prices were outrunning supply/demand fundamentals.
Lead also extended its rally, hitting the strongest in 3-3/4 years.
Zinc is the best performing metal on the London Metal Exchange this year, surging 72 percent this year on fears that closures and suspensions of major mines will lead to shortages.
Benchmark LME zinc climbed as far as $2,798 a tonne, its highest since March 6, 2008 and then pared gains to $2,775 in official trading, a gain of 1.8 percent.
"I'm a bit speechless on the movements in the last few weeks because we haven't seen a lot of change in the fundamentals that would have warranted these sort of price rises," said Caroline Bain, senior commodities economist at Capital Economics.
"I'm afraid I do feel there's a huge element of speculation and at some point sentiment will turn and we could see quite a sharp correction."
The market in zinc, used to protect steel from corroding, is expected to see a 400,000-tonne deficit this year, a Reuters poll showed.
But this could be offset by inventories, which in warehouses approved by the LME and ShFE stand at more than 470,000 tonnes.
Lead, often mined in the same deposits as zinc, also pushed higher, helped by a 16 percent fall in weekly inventories monitored by ShFE, bringing the stocks decline in China to 62 percent since late July.
LME lead hit $2,330 a tonne, the strongest since February 2013, before retreating slightly in official rings, where it was bid 3 percent up at $2,310, having failed to trade. Other metals were weaker, hit by speculators locking in profits from recent rallies and producer selling, traders said.
LME copper was bid 0.6 percent weaker at $5,835 a tonne, aluminium was bid down 1.1 percent at $1,751, nickel shed 0.6 percent to trade at $11,510 in official activity and tin traded down 1.8 percent at $20,975.
Matt France, head of institutional metals sales in Asia for broker Marex Spectron, said producers of aluminium and nickel had been taking advantage of the stronger prices.
"The relentless selling out of this region on these two metals, especially aluminium, suggests there is some producer flow going through that for now is too much for the passive bid," he said in a note.
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