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Zinc Leads Metals Slump as Europe Crisis Fuels Demand Concerns

Feb. 7 (Bloomberg) -- Zinc fell to the lowest price this week, leading a slump for industrial metals, on renewed concern that Europe’s debt crisis is worsening and will curb demand.

Industrial output in Spain dropped for a 16th month in December, a report showed today. European Central Bank President Mario Draghi said risks to the region’s economy remain on the “downside.” The dollar rose against a basket of six currencies including the euro, reducing the appeal of metals as alternative assets. Financial markets in China, the world’s biggest metals user, will be shut next week for Lunar New Year celebrations.

“There’s light being brought to the fact that there are still concerns over Europe, and weakness in the euro is keeping metals under pressure,” David Meger, the director of metal trading at Vision Financial Markets in Chicago, said in a telephone interview. “The Chinese New Year will also keep markets quiet.”

Zinc for delivery in three months slid 0.2 percent to settle at $2,163 a metric ton on the London Metal Exchange at 5:51 p.m. local time, after reaching $2,144, the lowest since Feb. 1. Nickel, copper, lead and tin also fell in London. Aluminum was unchanged, after touching a one-week low.

Most Chinese manufacturing and construction is slowing down for next week’s holiday and will only return to normal in about another month, Fang Junfeng, an analyst at Shanghai Cifco Futures Co., said by telephone from Shanghai. China accounts for 43 percent of world zinc usage and western Europe makes up 17 percent, RBC Capital Markets estimates.

Amply Supply

Stockpiles of zinc tracked by the LME are within about 3 percent of the peak in December, which was the highest since 1994.

Zinc and lead also dropped signs of rising mine production, said Robert Montefusco, a trader at Sucden Financial Ltd. in London. Glencore International Plc resumed its lead operation on the Italian island of Sardinia, a person familiar with the matter said yesterday. Vedanta Resources Plc said it plans to ramp up output at its Gamsberg zinc operation in South Africa.

In New York, copper futures for delivery in March lost 0.4 percent to close at $3.727 a pound on the Comex, the third decline this week.

To contact the reporters on this story: Joe Richter in New York at jrichter1@bloomberg.net; Maria Kolesnikova in London at mkolesnikova@bloomberg.net

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net

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