Zinc

[basserdan]

Zinc Rises to 3-Week High on Revived Use; Lead Climbs to Record

By Chanyaporn Chanjaroen and Brett Foley

July 12 (Bloomberg) -- Zinc rose to a three-week high on signs of revived demand for the metal used to galvanize steel. Lead pared gains after reaching a record and aluminum was little changed.

Stockpiles of zinc tracked by the London Metal Exchange dropped 475 metric tons, or 0.7 percent, to 69,350 tons, the exchange said today, the lowest in 16 years. World demand will exceed supply this year by 20,000 tons, said Kona Haque, an analyst at the Economist Intelligence Unit.

``Demand is fairly healthy,'' London-based Haque said today by phone. ``We've seen good consumption growth from China,'' the world's largest user of the metal, she said.

Zinc climbed $65, or 1.9 percent, to $3,540 a ton as of 4:37 p.m. in London. The contract earlier rose to $3,595, the highest since June 21.

The metal has gained 16 percent from this year's low on Feb. 2 as consumers increased purchases and tapped stockpiles. World demand will rise to 4 percent this year, after 3.7 percent growth in 2006, according to EIU estimates.

Nearby zinc contracts are now more expensive than longer- dated contracts, signaling buyers are more concerned about the current availability of metal than future supply. In a market with plentiful supply, longer-dated contracts are more expensive than nearby ones because of interest charges and storage costs.

Buyers of zinc for immediate delivery were asked to pay as much as $35 a ton more than the benchmark three-month futures contract, the highest premium since Jan. 30. There was no trade recorded at that level, according to data compiled by Bloomberg.

Lead Deficit

Lead pared gains after rising to $3,030 a ton, an all-time high, for a second consecutive day. The three-month contract increased $20, or 0.7 percent, to $3,000.

Demand for the metal, used in car batteries, will exceed production by 74,000 tons this year, according to Macquarie Bank Ltd., forcing consumers to tap inventories. Stockpiles tracked by the LME fell 975 tons to 41,950 tons. They have declined 62 percent in the past 12 months.

Western Australia state said today it will assess metal pollution at seven ports. Lead levels found in initial tests at Derby and Geraldton prompted further investigation, said Robert Atkins, the environmental regulation director at the state's Department of Environment. Jan Martin, a spokeswoman for the department, couldn't say whether exports would be disrupted.

Oxiana Ltd., an Australian precious- and base-metal mining company, exported 11,634 metric tons of contained lead through Geraldton last year, said Natalie Worley, a spokeswoman for the Melbourne-based company.

Mined Lead

Lead's 80 percent gain this year came after Ivernia Inc., which accounts for about 3 percent of the world's mined lead output, suspended exports from March 12 because of an investigation into lead poisoning.

Aluminum dropped $22 to $2,812 a ton. Rio Tinto Group, the world's third-largest mining company, agreed to buy aluminum producer Alcan Inc. for $38.1 billion. The deal would allow Rio to leapfrog United Co. Rusal as the world's biggest producer of the metal used in cans and airplanes.

Copper fell $48 to $7,892 a ton. Production disruptions in the Americas should limit any further decline in prices.

Codelco, the world's biggest copper producer, said today that protests by striking contract workers cut output for a fourth day at its Andina mine complex in Chile. A union at Dona Ines de Collahuasi, Chile's third-largest copper mine, said protests yesterday cut production by at least half. The mine's management said output was normal and no talks are planned.

Copper stockpiles monitored by the LME dropped 725 tons to 98,625 tons, bringing this year's decline to 46 percent.

Among other metals traded on the LME, nickel slipped $150 to $33,150 a ton and tin fell $35 to $14,125.

To contact the reporters on this story: Chanyaporn Chanjaroen in London at [e-mail] ; Brett Foley in London at [e-mail]

Last Updated: July 12, 2007 12:10 EDT
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