LONDON: Zinc prices climbed to their highest in nearly a decade on Monday as expectations of a large market deficit this year fuelled speculative buying, though technical factors are likely to limit gains.
Benchmark zinc on the London Metal Exchange ended 0.1 percent up at $3,125.5 a tonne. Prices of the metal used to galvanise steel had earlier touched $3,180.5, the highest since October 2007.
"There has been a lot of momentum buying. There is a chance of a price correction as these levels may mean a reversal of capacity shutdowns," said Commerzbank analyst Eugen Weinberg.
"Weaker demand and higher supplies in the medium term mean these (price) levels cannot be sustained."
ILZSG: The International Lead and Zinc Study Group (ILZSG) said the zinc market registered a deficit of 203,000 tonnes in the first half of the year and that total stocks at the end of June stood at 1.16 million tonnes, down from 1.355 million tonnes at the end of March.
SURVEY: The average of analysts' forecasts in a recent Reuters survey predicted a zinc market deficit of 412,000 tonnes this year.
TECHNICALS: Zinc price support is seen at $2,900 -- an area of congestion this year. The first upside barrier is at a Fibonacci retracement level of $3,200.
LME STOCKS: Zinc stocks in LME-approved warehouses, at 247,850 tonnes, are down more than 40 percent since the start of the year. Cancelled warrants -- metal earmarked for delivery -- at nearly 50 percent also reinforce concern about shortages on the LME market.
SPREADS: Worries about a tight market have narrowed the discount for the cash zinc contract against the three-month contract to near $7 a tonne from more than $27 at the start of April.
NICKEL PRICE: Nickel closed 3 percent higher at $11,315 a tonne. The stainless steel raw material earlier touched $11,355, its highest since the middle of December.
STOCKS: The nickel price spiked after LME data showed net fresh cancelled warrants of more than 17,000 tonnes. Cancelled warrants as a percentage of total stocks stand at 35 percent.
PHILIPPINES: Worries about nickel supplies from the Philippines, the world's top nickel ore exporter, have supported prices for much of this year.
ALUMINIUM: An environmental crackdown in top producer China pushed prices to $2,112 a tonne last week, the highest since September 2014. It ended up 0.9 percent at $2,081.
The premium for the cash aluminium contract over the three-month contract ended at $9.50 a tonne on Friday. That compares with a discount of $26 a month ago.
PRICES: Copper gained 1.6 percent to $6,586 a tonne, lead slipped 0.6 percent to $2,348 and tin was up 1.3 percent at $20,500.
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