Zinc prices touch 5-year high as metal traders bet on Chinese rebound

Zinc touched the highest in five years as the London Metal Exchange’s annual LME Week began with investors betting that a rebound in demand from China will underpin prices. Mining stocks also climbed.

Metals are extending their advance after China’s economy stabilised in the third quarter, expanding 6.7 per cent from a year earlier, to bolster the outlook for commodities demand. Zinc prices have gained more than 50 per cent this year amid a growing supply shortage.

“The strong zinc fundamentals remain unchanged in the past weeks,” Richard Fu, the head of Asia & Pacific at Amalgamated Metal Trading Ltd. in London, said in an e-mail. “The general macro economic figures in China recently are not bad.”

Zinc for delivery in three months rose 2.7 per cent to US$2,461.50 per tonne on Monday at the LME, having touched $2,466, the highest since August 2011.

Separately, local coal prices have spiked amid a supply crunch, boosting costs for metals production.

“Coal accounts for a big portion of aluminium production costs,” Jia Zheng, a trader at Shanghai Minghong Investment Management Co., said by phone from Shanghai, “The rally in metals may continue if coal holds on to its gains -- investors who play macro or energy cards remain bullish.”

Copper may drop as recent gains are probably unsustainable, Barclays Plc said in an e-mailed note received on Monday. The bank cited weak demand in emerging markets outside China and signs of ample supplies even as exchange stockpiles drop.