The price of zinc soared to its highest level since August 2011 after dropping supplies and prospects for surging demand triggered speculation that demand will surpass supply. Aluminum advanced to a six-month high.
Three-month delivery zinc on the London Metal Exchange increased as much as 1.5% to $2,370 per metric ton. The metal exchanged at $2,357 by 3:05 pm in Hong Kong. The metal has added 15% this year, the second-best performer among LME’s six base metals. Aluminum widened gains to $2,036 per ton, after attaining a bull market, against the background of bets that consumption will beat supply.
LME stockpiles for zinc dropped for a 16th day to 656, 675 tons on Monday, a low not recorded since December 2010, bourse data showed. Global demand for processed zinc will exceed production by 253,000 tons next year, widening from an 85,000-ton shortfall this year, Bank of America Merrill Lynch.
“For zinc, there’s been a decline in inventory levels and obviously the markets have been watching that. We will probably see those base metal prices rally away to some extent,” David Lennox of Fat Prophets in Sydney told Bloomberg by phone.
Factory output in China, the biggest consumer of industrial metals in the world, likely grew this month at the fastest rate since March 2013, according to the median projection in a Bloomberg survey ahead of a preliminary Purchasing Managers’ Index to be published on July 24 by HSBC Holdings Plc and Markit Economics.
According to Reuters, investors are gradually being attracted back to commodities, drawn by the appeal of a stronger world economic growth and more instability in some sectors, with many currently withdrawing their investment from grains into industrial metals.
“There’s a certain amount of relative value going on where investors prefer one metal over another,”said analyst Vivian Lloyd from Macquarie.
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