article: zinc advances to highest ever on prod sho
Zinc Advances to Highest Ever in London on Production Shortfall
By Chanyaporn Chanjaroen
Oct. 25 (Bloomberg) -- Zinc climbed to a record in London on speculation that demand for the metal used to galvanize steel will keep outpacing supply. Lead also rose to its highest ever.
Inventory tracked buy the London Metal Exchange dropped 1.5 percent to 115,650 metric tons, a 15-year low, the LME said in a daily report today. Production will lag behind demand by 420,000 tons this year, according to Societe Generale.
``The market continues to tighten and we don't see it easing until the middle of next year,'' Giles Lloyd, a London- based analyst at consulting company CRU said by phone.
Zinc for delivery in three months on the LME jumped $160, or 2.9 percent, to $4,060 a ton as of 5:30 p.m. London time. It earlier rose as much as $240, or 6.2 percent, to $4,140, beating the previous record set on Oct. 17 by $120.
The dark gray metal has more than doubled in the past year on soaring demand from China, the world's largest consumer. Global use will increase by 3.9 percent to 11.1 million tons this year, and by 2.6 percent to 11.4 million tons in 2007, the International Lead and Zinc Study Group said Oct. 9.
Other metals, including copper, nickel and lead, are also forecast to experience production shortfalls this year. Michael Lewis, head of commodities research in London at Deutsche Bank AG, Germany's largest bank, said in an interview he's more bullish on lead and zinc, whose stockpiles continue to decline.
Lead was $38 higher at $1,570 a ton. Earlier it jumped to a record $1,590 on the LME, beating the previous high set Oct. 16 by $40.
Copper Drops
LME-monitored lead inventory dropped 5 percent in the past three days to 45,325 tons, the lowest since January 9. Falling production at BHP Billiton's Cannington mine in Australia, the world's largest lead mine, has cut supplies of the metal used in car batteries.
Copper dropped for a fourth straight trading session, losing $10 at $7,485 a ton. Copper for delivery in December on the Comex division of the New York Mercantile Exchange dropped $1.05, or 0.3 percent, to $3.409 a pound.
LME copper stockpiles rose to their highest in more than six weeks, showing a supply shortage may be easing. Inventory jumped 2.9 percent to 124,275 tons, the highest since Sept. 8.
``We're becoming more concerned about copper as stocks are rising, not falling,'' Robin Bhar, a London-based metals analyst at UBS Ltd., said in a daily research note. Bhar has tracked metals since 1984.
The premium between copper for immediate delivery over three-month prices narrowed to $8 yesterday, from more than $20 last week. A decline in the premium, known as a backwardation, usually indicates an easing of constraints on supply.
Nickel Slump
Nickel slumped $400 to $31,800 a ton on the LME. Nickel inventory tracked by the LME gained for a third straight day, increasing 510 tons, or 9.7 percent, to 5,748 tons. Stockpiles have gained 12 percent this month. Still, metal bought and due to be shipped from LME-registered warehouses accounted for more than a third of registered inventory.
The U.S. Federal Reserve will probably leave its benchmark interest rate unchanged at 5.25 percent today for a third month, according to all 106 economists surveyed by Bloomberg News. The Fed, which raised borrowing costs for two years through June, will announce its decision at about 2:15 p.m. Washington time.
An easing in borrowing costs usually spurs economic and industrial activity and boosts demand for metals.
Also on the LME, aluminum gained $66 to $2,700 a ton. Tin was unchanged at $10,200.
To contact the reporter on this story: Chanyaporn Chanjaroen in London at [email protected] .
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