Still ok withZinc position:Zinc Rises for Second Day in London...

Still ok withZinc position:

Zinc Rises for Second Day in London After Inventory Declines

By Chanyaporn Chanjaroen

Nov. 16 (Bloomberg) -- Zinc gained for a second day in London after stockpiles of the metal used to galvanize steel dropped, renewing speculation demand may exceed production.

Inventory tracked by the London Metal Exchange fell 550 metric tons, or 0.6 percent, to 93,025 tons, the exchange said today in a daily report. That's the lowest since April 1991. The global market had a production shortfall of 304,000 tons in the nine months through September, the Lisbon-based International Lead and Zinc Study Group said yesterday.

``We never think the zinc rally is over,'' said Mike Skinner, a London-based analyst at Standard Bank London Ltd., in an interview. ``Zinc stocks have been declining, indicating there's not much supply out there.''

Zinc for delivery in three months on the LME gained $50, or 1.2 percent, to $4,240 a ton as of 11:04 a.m. local time. The metal has more than doubled in the past year, and climbed to an all-time high of $4,515 a ton on Nov. 9.

The metal declined to a three-week low on Nov. 14 due to selling by investors tracking technical charts, Skinner said.

Zinc has been buoyed by rising demand from China, the world's largest consumer of the metal. Consumption in the world's most populous country expanded 7 percent in the first nine months, according to the government-funded ILZSG. Demand in the U.S., the world's second-largest consumer, rose 8 percent.

Metals demand will remain ``healthy'' through at least March 2007, Vedanta Resources Plc, India's largest producer of copper and zinc, said today. It reported net income quadrupled to $447.6 million in the six months ended Sept. 30.

Rising Chinese Production

China, also the world's largest copper consumer, is producing more metal and its output may rise as much as 8.7 percent next year, Shang Fushan, director of the copper department of the China Nonferrous Metals Industry Association, said today at a conference in Shanghai.

``The domestic output increase this year has made up for an import drop,'' Shang said. China's imports of copper and copper products declined 22 percent in the first 10 months of 2006 to 1.7 million tons, the Beijing-based customs office said on its Web site on Nov. 8. Copper imports into the world's fastest- growing major economy have been falling since October 2005.

China's copper consumption this year may rise 5.6 percent this year, the lowest since 2000, according to China Minmetals Corp., the country's biggest metals trader.

Lower demand growth for copper in China partly contributed to the metal's price decline, said analysts including Jon Bergtheil at JPMorgan Securities Ltd. in London. Prices dropped $15, or 0.2 percent, at $6,895 a ton in London. The metal has lost 20 percent since trading at an all-time high of $8,800 on May 11.

Also on the LME, aluminum slid $14 to $2,685 and nickel dropped $200 to $29,700. Lead was unchanged at $1,520 and tin gained $225 to $9,875.

To contact the reporters on the story: Chanyaporn Chanjaroen in London at [email protected] .

Last Updated: November 16, 2006 07:25 EST