NO WONDER THE SHARES TANKED AGAIN Zinc Trades Near 2 1/2 Year...

NO WONDER THE SHARES TANKED AGAIN

Zinc Trades Near 2 1/2 Year Low in Asia as China Output Gained

By Glenys Sim

June 16 (Bloomberg) -- Zinc fell for a fourth day in five to trade near a 2 1/2 year low in Asia after a report showed output in China, the world's largest producer, rose even as the deadliest earthquake in three decades disrupted production.

Zinc output in China was 339,000 metric tons in May, up 4.2 percent from a year earlier, according to data issued by the country's statistics bureau today. Output in the first five months of this year rose 4.1 percent to 1.55 million tons.

``Zinc output turned out stronger than expected, especially after so many reports on output cuts last month,'' said Pang Ying, an analyst at Shenzhen Rongtuo Trading Co.

Zinc for delivery in three months on the London Metal Exchange fell as much as 0.8 percent to $1,884 a ton, and stood at $1,885 at 11:33 a.m. Singapore time. The contract fell to $1,865.25 on June 12, the lowest since December 2005.

Zinc for delivery in August, the most-active contract, fell as much as 115 yuan, or 0.7 percent, to 15,615 yuan ($2,262) a ton on the Shanghai Futures Exchange, and ended the morning at 15,755 yuan. Shanghai zinc slumped to a record low of 15,300 yuan on June 12.

China's zinc output this year may drop by 60,000 tons after the May 12 earthquake in Sichuan province, Beijing Antaike Information Development Co. analyst Feng Juncong said May 20.

China's industrial production accelerated in May, increasing the risk of further monetary policy measures to slow growth and curb inflation.

``Demand this year for metals has been steady at best, so any kind of credit tightening doesn't bode well for metals consumption,'' said Jia Zheng, an analyst at Southwest Futures Co. in Shanghai. ``Producers are finding it increasingly difficult to obtain financing to make purchases.''

Chinese Copper

Copper also fell as China's output remained high, weighing on domestic imports, the world's biggest.

Copper for delivery in three months fell 0.2 percent to $7,965 a ton on the London Metal Exchange at 11:47 a.m. Singapore time. Copper for August delivery on the Shanghai Futures Exchange added 0.6 percent to 60,650 yuan a ton at the midday break.

``Because of the wide spread between London and Shanghai prices, we'll continue to see imports of refined copper decline, imports of copper scrap and concentrates increase, and output of refined copper rise,'' Jia said. ``This will probably result in persistent price weakness in the medium term.''

Among other LME-traded metals, aluminum was up 0.2 percent at $2,949.75 a ton, and lead gained 0.9 percent to $1,790 a ton. Nickel and tin had not traded as of 12:06 p.m. in Singapore.

To contact the reporter for this story: Glenys Sim in Singapore at [email protected]