Zinc breaks USD3,000 barrier as metals rally gathers pace

Zinc surged above USD3,000 a metric ton amid persistent global deficits, and aluminum climbed as China reined in illegal capacity, adding fresh impetus to the rally even as some investors expressed concerns.

Zinc jumped as much as 2.6 percent to $3,037 a ton on the London Metal Exchange, the highest level since 2007, and traded at $3,029 at 1:20 p.m. in London. Aluminum gained as much as 1.3 percent to $2,075.50 a ton, the highest since November 2014, while nickel, copper and lead all traded higher.

An index of base metals rallied to a two-year high last week amid better-than-expected demand in China and a weakening dollar. The Chinese government is stepping up moves to shut illegal aluminum and steel plants this year, both to cut excess capacity and help to protect the environment.

Efforts to promote economic growth in China ahead of a leadership reshuffle scheduled for later this year are also boosting metals usage in manufacturing and industrial sectors, according to Bernard Dahdah, a metals analyst at Natixis SA in London.

“Earlier this year, a lot of the rally was supply related, but recently we’ve seen demand starting to support as well,” Dahdah said by phone.

Zinc rallied 60 percent last year as worldwide demand topped supply after producers including Glencore Plc suspended some output. In the first five months of 2017, there was a global deficit of 181,000 tons, according to the World Bureau of Metal Statistics.

But the metals rally has some investors warning of a pullback.

Hedge fund manager Crispin Odey is shorting metal stocks in anticipation of slowing growth in China. “China’s economy in a year’s time will be much weaker than it is now,” Odey, whose London-based firm manages about USD6 billion, said in a phone interview. MDT/Bloomberg