Zinc extends gains, hovers at four-year high on regional tightness

LONDON: Zinc prices extended gains for a sixth straight session on Wednesday, revisiting their highest levels in more than four years on supply worries and speculative buying.

Benchmark three-month zinc on the London Metal Exchange rose 1.1% to $3,932 a metric ton in official open-outcry trading, its strongest since June 2022.

Zinc, mainly used to galvanise steel, has been hit by regional disparity, with inventories eroding in warehouses registered with the LME while piling up in China.

The localised shortages have sent the premium of cash LME zinc over the three-month futures to $132 a ton, up from zero in early July and the highest since last December.

Speculative buying has underpinned the strong zinc prices, which have gained 25% this year.

“Until you see the longs drop out of the banding reports I would be cautious about calling a top,” said Alastair Munro, senior base metals strategist at broker Marex.

“The LME is yet to see meaningful enough stock inflows.”

LME inventories slumped by 31% over the two months up to August 17, and have rebounded by 13% since then.

Three-month LME copper, which has also been hit by falling inventories and supply worries, dipped 0.1% in official activity to $14,335 a ton, having earlier touched its highest in six months at $14,437.

The most-traded copper contract on the Shanghai Futures Exchange SCFcv1 rose 0.6% to 108,750 yuan ($16,182.55) a ton.

The metal, nicknamed Dr Copper for its use as a barometer of wider economic health, was restrained as markets awaited U.S. inflation data due at 1230 GMT.

The uncertainty offset price support from waning LME inventories as non-traditional copper participants including hedge funds and other speculative investors trade on inventory data showing falling warehouse stocks.

“There are a lot of non-traditional sources trading copper, and an awful amount of fast money moving on data releases,” said David Wilson, head of metals strategy at BNP Paribas.

Among other metals, aluminium and lead were flat at $3,238 a ton and $1,905 respectively, nickel was slightly weaker at $17,040 and tin shed 0.7% to $55,450.