METALS-London zinc hits 15-mth high amid China steel cuts...

METALS-London zinc hits 15-mth high amid China steel cuts

Melanie Burton
52 Mins Ago - Reuters

MELBOURNE, Aug 26 (Reuters) - London zinc rallied to its highest in 15 months on Friday as fresh shutdowns in China's steel sector added to mine supply concerns to ignite a short-covering rally.
China plans to cut steel production by 2.91 million tonnes this year in inner Mongolia, an industry group reported on its website on Friday.

As China steel mills shutter, steel prices lift, meaning remaining mills can pay more for ingredients such as zinc.

The news pushed investors to cover short positions in a market already beset by tight supply.
"Zinc has definitely been the outperformer. It's coming from supply constraints with the closure last year of big mines," said strategist Vivek Dhar of Commonwealth Bank Australia.

"Stronger than expected steel output in China this year has also helped boost zinc demand and prices."
LME zinc rallied to its highest since May 2015 at $2,327.50 a tonne, before trading at $2,318 a tonne by 0239 GMT, up 0.9 percent, and bringing the year's gains to 44 percent.

"There have been a lot of recent bets that recent price weakness was going to see heavy liquidation and risk/reward made it an easier short. So these guys have now been wrong-sided," said a trader in Singapore.
"If rebar and Dalian turn back up again (like they did yesterday) ... then zinc could have another leg higher before London get in."

In Shanghai, zinc was up 2.6 percent.

Other metals edged higher, with positions trimmed as central bankers converge on the mountain resort of Jackson Hole Thursday for an annual conference on monetary policy.

London Metal Exchange copper had climbed half a percent to $4,647.50 a tonne by 0150 GMT, after closing little changed in the previous session when it fell to its weakest since June 24 at $4,620 a tonne.
Shanghai Futures Exchange copper rose 0.2 percent to 36,410 yuan ($5,464) a tonne.

Brighter news for metals demand came from the United States where new orders for manufactured capital goods climbed for a second straight month in July.

LME nickel also edged up half a percent, but was still down 4.3 percent this week, its biggest weekly drop since May, crimping the year's gains to 12 percent.

Lower Chinese imports and an absence of fresh mine suspensions in the Philippines have eroded a risk premiums that drove prices to their highest in a year earlier this month.

http://www.cnbc.com/2016/08/25/reut...c-hits-15-mth-high-amid-china-steel-cuts.html