Zinc Jumps as Inventories Fall, Signaling Demand Remains Strong
London, Nov. 2 (Bloomberg) -- Zinc jumped more than 4
percent, its biggest one-day gain in almost eight months, after
inventories of the metal fell close to the lowest level in six
years, signaling that shortages could arise by year-end.
Inventories in London Metal Exchange registered warehouses
fell by 1,725 metric tons to 345,850 tons in today's report.
Stocks last week stood at their lowest level since 1992 and could
fall even lower this week, traders said.
''We had a reasonable stock fall this morning, and that's
helped lift zinc up,'' said Martin Squires, analyst at Rudolf
Wolff & Co., a LME metals brokerage in London. ''It still looks
like the market could be in a small deficit this year.''
Zinc for delivery three months forward on the LME rose as
much as $39 a metric ton, or 4.1 percent, to $988 a ton, its
highest price in three weeks.
Even with stockpiles declining, zinc prices reached a 4 1/2
year low of $947 a ton last week amid speculation that falling
demand from consumers in Asia, such as the construction industry,
would allow stockpiles to build. Zinc's main use is to make to
galvanized steel, which in Asia is used to make house roofs. Asia
is the world's second-largest region for zinc after western
Europe.
Squires forecast that there will be a 16,000-ton shortfall
of zinc this year, meaning inventory is having to be drawn down
from stocks on the LME. As a result, some speculators who sold
metal in anticipation of lower prices are now buying contracts to
relieve their obligation to deliver zinc, causing today's rally
to accelerate, traders said.
Still, Squires added that prices would likely average $960 a
ton next year, as global demand weakens and several zinc mines
are expected to increase output in 1999, leaving a surplus of
zinc next year of about 108,000 tons.
From Bloomberg News
--Andy Webb-Vidal in the London newsroom (44-171) 330-7743/tc
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