Zinc falls after nearing 3-month high on tighter supplies

LONDON: Zinc fell on Wednesday on trade and inflation worries, although it had earlier risen back towards a 3-month high reached last week on shrinking inventories and smelter cuts in China.

Zinc inventories in LME-registered warehouses fell to 194,575 tonnes from more than 250,000 tonnes in August and are nearing 10-year lows.

Stockpiles in Shanghai Futures Exchange storehouses at 29,204 tonnes are the smallest since 2007.

Production cutbacks at China's zinc smelters in response to tighter environmental checks and weaker profits have tightened supply.

But the longer-term outlook for zinc is not so bullish, Casper Burgering, analyst at ABN Amro, said.

"There's been investments (in zinc mining that) are expected to come onto the market in 2019. That will shift the market balance. In the short term prices could maintain these levels but (in 2019) price pressures will build."

Also weighing on zinc were lingering worries that trade tensions will sap growth. The worries, coupled with rising U.S. bond yields, pushed world shares down to a three month low.

ZINC: Three-month zinc on the London Metal Exchange closed down 1.8 percent at $2,629, having hit $2,715, nearing last week's three month high. The metal used to galvanise steel has surged some 18 percent from August's 22-month low of $2,283.

DEMAND: Demand for refined zinc will exceed supply by 322,000 tonnes this year, but the gap will narrow to 72,000 tonnes in 2019, industry data showed on Monday.

"Zinc, along with nickel, has been the major beneficiary of ferrous moves. But (it) should run into major resistance between $2,728-52 - the high from Oct 2," said Marex Spectron in a note.

"Whilst we do advocate owning dips, the path higher will remain strewn with rocks ... (as) the macro pall hovers over the complex."

SPREAD: The premium of cash zinc over the three-month contract rose to $41.50, reversing recent falls and signalling a lack of nearby supply.

SHFE: The Shanghai Futures Exchange will add lead, zinc 0#SZN:, tin 0#SSN: and nickel 0#SNI: to its new physical trading platform from Oct. 18, the exchange said in a statement on Wednesday.

COPPER RESTART: BHP, expects a plant at its Olympic Dam mine to restart this month following repairs and the company has found a way to deliver returns from the asset as part of a focus on maximising productivity.

PRICES: Copper ended down 0.8 percent at $6,239 a tonne, aluminium closed down 0.4 percent at $2,047, lead ended down 1.3 percent at $1,910, nickel closed down 2.6 percent at $12,680 while tin bucked the trend, closing up 0.7 percent at $19,025.