Zinc extends gains, hovers at four-year high on regional tightness

Zinc prices surged to a four-year high on Wednesday, driven by regional tightness and speculative buying, according to the London Metal Exchange. The benchmark three-month zinc rose 1.1% to $3,932 a metric ton, its strongest level since June 2022. Zinc, primarily used to galvanize steel, has been impacted by disparities in inventories, with LME warehouses experiencing shortages while stockpiles grow in China.

These localized shortages have created a premium of $132 a ton between the cash LME zinc and the three-month futures contract, a level not seen since December 2021. Speculative buying has fueled the upward price movement, with zinc gaining 25% this year. However, Alastair Munro, a senior base metals strategist at broker Marex, cautioned against calling a peak in zinc prices until long positions dwindle in banding reports, as the LME has yet to witness significant stock inflows.

LME inventories dropped by 31% from August 17 to 11, but have since rebounded by 13%. Meanwhile, copper prices on the Shanghai Futures Exchange fell 0.1% to $14,335 a ton, while the most-traded copper contract on the Shanghai Futures Exchange SCFcv1 declined 0.6% to 108,750 yuan ($16,182.55) a ton. Non-traditional copper traders and speculators have been active due to inventory data showing falling warehouse stocks.

Aluminium and lead prices remained flat, while nickel showed a slight decline and tin prices fell by 0.7%.