Zinc stocks held in London Metal Exchange warehouses fell 250 tonnes to their lowest since late 2008, data showed on Friday, down about a third from their October peak.
The global zinc market deficit widened to 36,900 tonnes in October from a revised deficit of 35,900 tonnes in September, the latest industry data show.
"We've always seen Q1 2018 as the peak of the zinc rally and were looking previously for $3,400/t. Zinc has got very strong momentum, it's entirely possible it could pierce that level on a three to six month basis," said Macquarie analyst Vivienne Lloyd.
She added, however: "Zinc supply is slowly coming back and the greater length of time zinc displays a large price disparity to aluminium the more likely we'll see substitution."
FUNDAMENTALS
ZINC PRICE: Three-month zinc on the London Metal Exchange was last bid up 0.1 percent at $3,366 a tonne in official midday rings, having hit its highest since August 2007 at $3,375.
TECHNICALS: Indicating near-term market tightness, the premium for cash over the three-month contract <CMZN0-3> was at $22.50 a tonne, against a $10.25 discount on Dec. 20.
COPPER PRICE: Copper traded down 0.7 percent in rings to $7,140 a tonne, after gaining 7 percent in December.
"Physical interest remains muted across the majority of these metals and Chinese buying (is) likely to remain so until after their New Year holidays next month. Ahead of the weekend, we would not be surprised to see some speculative profit taking," said Marex Spectron in a note.
CHILE: Unionised workers at Glencore Plc's Lomas Bayas copper mine in Chile rejected a final contract offer and began government-facilitated mediation on Thursday to avoid a strike.
CHINA: A blizzard of data in coming weeks is expected to show China's economy ended a strong 2017 on a slightly softer note, but activity has likely remained more resilient than expected despite a crackdown on industrial pollution and a cooling property market.
WIDER MARKETS: World stocks scaled fresh record highs on Friday after more data pointed to the strength of the U.S economy, the world's largest, while the dollar was stuck near four-month lows before crucial payroll numbers.
STEEL BAN: China will continue to "unswervingly" cut existing steel capacity and strictly ban the launch of any new steelmaking facilities in 2018, its government said this week.
OTHER METALS: Lead was last bid down 0.1 percent in rings at $2,584, aluminium traded down 1.1 percent at $2,225, tin traded up 0.4 percent at $19,925 while nickel was last bid down 1.2 percent at $12,500.