Zinc Jumps as Industrial Metals Rally After Oil Pushes Above $50by
Inventories of the metal on the LME drop to lowest since 2009
Zinc supply to remain tight until 2018, metals trader says
Zinc rose the most in two weeks and industrial metals rallied after oil climbed above $50 a barrel for the first time this year, helping buoy investor sentiment on the global economy.
Zinc is up 17 percent this year, the top performer among the six main metals on the London Metal Exchange, as supply cuts begin to take effect and inventories of the metal fall to the lowest since 2009. Zinc demand will benefit to the extent that China continues to rely on infrastructure growth for overall economic support, Goldman Sachs Group Inc. said in a May 19 report.
“Fundamentally sound zinc is assuming a leadership role today as oil tops $50 for the first time in a while,” Michael Turek, the head of base metals at BGC Partners Inc. in New York, said in an e-mail. Improving sentiment, solid demand and production cuts are helping zinc prices, he said.
Zinc for delivery in three months jumped 2.3 percent to settle at $1,876 a metric ton at 5:50 p.m. on the LME, the biggest gain since May 11.
More-expensive oil boosts production costs, deterring miners from increasing output.
Zinc-ore supply will remain tight until volumes arrive in 2018, Peng Shuqing, assistant general manager of Shenzhen Jiangtong Southern Co., said at a Shanghai conference on Thursday. Investors should buy zinc over the medium to long term because of the ore shortage, he said. The company produces copper and trades metals including zinc.
Brent crude rose above $50 a barrel for the first time since November after a drop in U.S. stockpiles.
Among other metals:
- Copper futures for July delivery rose less than 0.1 percent to $2.1025 a pound on the Comex in New York.
- Aluminum, copper, nickel, lead and tin also advanced on the LME.