Zinc, Lead Rise to Records in London After Inventories Decline
By Chanyaporn Chanjaroen
Nov. 7 (Bloomberg) -- Zinc prices in London rose to a record after inventories of the metal used to galvanize steel dropped to the lowest in 15 years. Lead also climbed to the highest ever.
Stockpiles of zinc monitored by the London Metal Exchange dropped 1.8 percent to 99,550 tons today. They have plunged 79 percent in the past year to the lowest since April 1991. Prices have more than doubled in the past year, leading gains among more than 50 commodities.
``At current rates of decline, inventories could be depleted by midway through next year,'' said John Meyer, a London-based analyst at Numis Securities.
Zinc for delivery in three months rose $60, or 1.4 percent, to $4,490 a metric ton at 1:32 p.m. on the LME. Prices earlier reached a record $4,510.25
A futures contract is an obligation to buy or sell a commodity at a fixed price for a specific delivery date.
Consumers are using stockpiles to fill a supply deficit forecast at 448,000 tons this year and 18,000 tons next year, according to Brook Hunt forecasts cited by Meyer.
Record prices have boosted the stocks of zinc miners. Korea Zinc Co. and Zinifex Ltd., the world's largest producers, climbed to records today. OAO Chelyabinsk Zinc Plant, Russian's largest producer, raised $336 million, more than forecast, in an equity sale.
``Zinc prices are expected to stay at high levels next year because supplies aren't something that can be easily increased,'' said Kim Hyung Chan, who helps manage about $500 million at KTB Asset Management Co. in Seoul. ``Prices may not rise rapidly, like this year, but it will definitely not fall back to previous levels. This is positive for zinc stocks.''
Margin Payments
Lead gained $25, or 1.5 percent, to $1,735 a ton, the highest ever. Stockpiles tracked by the LME dropped 1.9 percent to 47,050 tons. They have dropped 3.2 percent in the past 12 months.
Traders on the LME were told to make higher margin payments, the amount required to set aside as a protection from possible defaults, for lead and zinc after prices jumped.
The margin for zinc will be raised to $11,975 from $10,500 for each 25 metric ton lot, said LCH.Clearnet, which guarantees trades for London's financial markets. Lead will rise to $3,100 from $2,500. The changes will be effective after the close of business on Nov. 10, LCH.Clearnet said in a statement on its Web site yesterday.
The margin for nickel was raised to $21,000 from $16,800. It was cut for aluminum to $4,950 from $5,000. Tin was reduced to $2,700 from $3,110. Copper was unchanged at $18,750.
Copper gained $65, or 0.9 percent, to $7,425 a ton in London. Prices were up for the fourth straight session.
Copper futures for December delivery rose 3.2 cents, or 1 percent, to $3.369 a pound on the Comex division of the New York Mercantile Exchange.
To contact the reporter on this story: Chanyaporn Chanjaroen in London at cchanjaroen@bloomberg.net .
Last Updated: November 7, 2006 08:44 EST
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