(Bloomberg) -- Zinc rallied to the highest since April 2019, lifted by concerns over falling Chinese production and as hopes for a U.S. stimulus deal buoyed market sentiment.
Refined zinc output in China, the top producer, fell to 562,300 tons last month, down by 6,900 tons from October, Shanghai Metals Market said, citing a monthly survey of smelters. Production is expected to drop further in December as falling processing fees crimp margins, according to the researcher. Treatment charges for Chinese smelters to process zinc concentrate slumped to the lowest level in more than two years.
Supply constraints have helped fuel a 70% rebound in prices from a March low, even as demand took a hit in the early stages of the coronavirus pandemic. Concerns were heightened last month when Vedanta Zinc International suspended operations at its Gamsberg mine in South Africa. Since June, demand for zinc and lead has bounced back, led by a recovery in China, said Trafigura Group Ltd., the world's second-biggest independent metals trader.
“Europe has also recovered well and we see continued pickup across all markets into the fourth quarter,” Amin Zahir, Trafigura's head of metals and minerals trading, said in an earnings statement. “We remain positive about demand for both metals on a forward-looking basis, with continued support from both construction and automotive industries.”
The zinc market “gained support from recent suspension at South African based Gamsberg mine and concentrate market tightness in China,” Wenyu Yao, senior commodities strategist at ING Bank, said in a note.
Zinc and copper have surged about 25% this year, pacing gains among six main base metals on the London Metal Exchange, as China leads a global economic rebound from the coronavirus pandemic.
Zinc rose 2% to settle at $2,855.50 a metric ton at 5:51 p.m. in London, advancing for a straight fifth day. Copper added 0.3% to $7,723 a ton and aluminum climbed 2.3%.
©2020 Bloomberg L.P.
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