Photographer: Daniel Acker/Bloomberg

Top Pick Zinc Races to 7-Year High on Chinese Spending Spree

  • * All metals gain on prospect of strong demand from China
  • * Zinc is Huatai Future’s top pick among base metals

Zinc in London raced to a seven-year high, leading the impressive advance in metals over the past three weeks on the prospect of weighty infrastructure spending in China, the top consumer.

The metal used to galvanize steel rose as much as 3 percent to $2,684.50 a metric ton on the London Metal Exchange, the highest since January 2010, as all metals gained. It is now up 64 percent this year.

Metals prices have been on a tear recently, buoyed by a Chinese government infrastructure spending spree and President-elect Donald Trump’s plan for $1 trillion in U.S. building investment. The rally continues even as Goldman Sachs Group Inc. warned prices may have risen too far, too fast. Copper rallied as much as 21 percent last week, the most since 2008.

“The optimism surrounding China is based largely on the ongoing infrastructure spending that is underway and boosted by recent announcements from the state planner on increased investment in the power grid and railway network,” Societe Generale SA analyst Robin Bhar wrote in a Nov. 14 report.

Last week, China announced plans to expand power generation capacity by 31 percent to 2,000 gigawatts in five years through 2020, and also approved three railway projects with 85.6 billion yuan of investment.

China’s outlook has brightened after policy makers arrested a slide in growth in spending on buildings, machinery and other fixed assets in recent months. Industrial output gains have stabilized in excess of 6 percent compared with a year before, according to data Monday.

Zinc is Huatai Futures Co.’s top pick among base metals followed by nickel as “the expectation has translated into actual tightness in spot market amid low stockpiles,” Wu Xiangfeng, an analyst with Huatai, said by phone from Shanghai. Zinc stockpiles tracked by LME are near the lowest level since 2009 after mines depleted and miners scaled back production amid a price plunge.

Zinc was 1.5 percent higher at $2,645 a ton at 11:35 a.m. in Shanghai, following Monday’s 5.5 percent surge. On the Shanghai Futures Exchange, zinc rose by 3.9 percent, the daily limit, to 22,100 yuan ($3,222). The London Metal Exchange Index, a measure of six base metals, has risen 14 percent since Oct. 21.

Copper in London advanced 1.8 percent, adding to last week’s 11 percent rally, the most in five years.

— With assistance by Winnie Zhu

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