Zinc Rises to Record for a Second Day in London on Output Drop
By Chanyaporn Chanjaroen
Oct. 26 (Bloomberg) -- Zinc rose to a record for a second day in London after Zinifex Ltd., the world's second-largest producer of the metal used to galvanize steel, said its production dropped and demand remains ``strong.''
Zinifex, based in Melbourne, said today that output fell 13 percent in the three months ended Sept. 30, due to maintenance shutdowns at a smelter and its Century mine. Global zinc demand was already forecast by Societe Generale to outpace production by 420,000 metric tons this year.
``Prices are being supported by continued strong global demand for zinc, particularly from China, and a well-documented shortage of zinc mine capacity,'' Zinifex Chief Executive Officer Greig Gailey said today in a statement.
Zinc for delivery in three months on the LME advanced $100, or 2.5 percent, to $4,140 a ton as of 12:04 p.m. local time after climbing to a record $4,145.
LME-monitored inventory that can be tapped by consumers to fill the production shortfall dropped to a 15-year low. Stockpiles declined 1.5 percent to 113,900 tons, the exchange said in a daily report today.
Global use will increase 3.9 percent to 11.1 million tons this year and 2.6 percent to 11.4 million tons in 2007, the International Lead and Zinc Study Group said on Oct. 9. China is the world's largest zinc user.
``The market remains in significant deficit and looks like staying that way for the better part of next year,'' David Thurtell, a London-based analyst at BNP Paribas, wrote in a report yesterday.
Nickel Slump
Nickel fell $600, or 1.9 percent, to $31,000 a ton, erasing an earlier gain after LME inventory jumped 19 percent to 6,834 tons, the highest since Sept. 13.
Copper gained for the first day in five, advancing $42, or 0.6 percent, to $7,502 a ton. Chile's Codelco, the world's biggest copper producer, lost a bid to gain additional time to settle a wage agreement with workers at its largest mine.
Unions representing most workers at the Chuquicamata mine yesterday rejected a proposal to begin talks ahead of schedule after the company failed to make a wage or bonus offer, said Miguel Lopez, president of the mine's third-largest union. An early settlement would remove a bullish factor for copper, said analysts including UBS AG's Robin Bhar in London.
Chuquicamata's largest unions will begin talks in mid- November to renew labor contracts that expire at the end of December, Lopez said.
U.S. Growth
Prices of metals were also supported after the central bank of the U.S., the world's second-largest consumer of copper and aluminum, said its economy is expanding and inflation is under control. The Federal Reserve kept its benchmark interest rate at 5.25 percent for a third month, and said yesterday that U.S. economic growth would continue at a ``moderate'' pace.
The LME index tracking prices of the six base metals traded on the exchange has dropped 4.9 percent since its May 11 peak on concern that interest-rate rises in the U.S. would slow down the economy and curb demand for industrial metals.
Also on the LME, aluminum gained $16 to $2,780 a ton. Tin rose $50 to $10,250 and lead lost $15 to $1,570.
To contact the reporter on this story: Chanyaporn Chanjaroen in London at cchanjaroen@bloomberg.net .
Last Updated: October 26, 2006 07:11 EDT
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