Zinc hits two-week high as tight stocks spur bullish sentiment

Zinc surged to a two-week peak on Monday, driven by dwindling inventories and surging power prices, signaling a bullish outlook for the metal used in steel production. The benchmark three-month zinc on the London Metal Exchange rose by 1.5% to $3,800.50 per metric ton, reaching its highest level since October 12. Citi analysts noted that while mine supply is expected to increase in 2027, some market participants believe the current optimism regarding growth may be excessive given recent underperformance.

The global refined zinc market turned into a deficit of 3,900 tons in August, compared to a surplus of 27,500 tons in July, according to data from the International Lead and Zinc Study Group. Zinc prices were supported by high power prices, reduced production in Peru, and a decrease in inventories, as per one trader. London copper eased due to rising LME stocks and demand concerns, with Shanghai Futures Exchange zinc stocks dropping 5% to 137,139 tons, the lowest since March.

LME zinc inventories stood at 133,700 tons, while the cash LME zinc contract was priced around $80 per ton above the three-month forward, indicating near-term tightness. One entity holds between 30% and 40% of LME zinc warrants and cash contracts, as per exchange data. Copper edged up by 0.1% to $14,328.50 per ton, with minimal impact from a strike at Teck Resources’ Highland Valley copper mine.

The Yangshan copper premium, reflecting China's demand for imported copper, reached $168 per ton, its highest level since 2014, following a more than 25% decline in ShFE copper stocks to 54,356 tons. Aluminium, lead, nickel, and tin prices also fluctuated, with aluminium dipping 0.1% to $3,039.50, lead adding 0.6% to $1,918.50, nickel falling 0.5% to $15,765, and tin gaining 1.1% to $50,920.