Zinc prices surge on supply fears

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LONDON — Zinc prices jumped on Tuesday on

concern over potential shortages resulting from falling

inventories and possible reductions in smelter output because of

high energy prices.

Three-month zinc on the London Metal Exchange (LME)

climbed 2.9% to $3,618 a tonne by 1000 GMT, having touched its

lowest in more than a month on Monday.

LME zinc has shed 20% over the past two months along with

other industrial metals, hit by concern over a slowdown in top

metals consumer China and potential global recession.

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“Even though you have this quite bearish expectation about

slowing demand and weakening economic activity, some of these

metals markets are suffering from quite acute tightness,” said

Tom Mulqueen, head of research at Amalgamated Metal Trading.

“Today that’s reflected in zinc, with the drawdowns from

warehouses, shortages in the U.S. and Europe, and a deficit

forecast for the year.”

LME data on Tuesday showed owners of more than 18,000 tonnes

of zinc in warehouses in Malaysia gave notice that they want to

withdraw the material, reducing available stocks by 30%.

In April sources told Reuters that commodity trader

Trafigura and others were moving to take large amounts of zinc

out of LME-approved warehouses in Asia.

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The sources said at the time that Trafigura was bringing the

metal from Asia to Europe to replace lost production at

Belgium’s Nyrstar , in which it has a majority stake.

Premiums for physical metal in Europe have soared owing to

zinc smelter cutbacks in the face of power prices that hit

three-month highs on Tuesday.

* The premium for cash LME zinc over the three-month

contract spiked to $76.25 a tonne, its strongest since

December and up from $14.30 a week ago, indicating short-term

shortages of LME inventories.

* Also supporting metals prices was a weaker dollar index

, which makes commodities priced in the U.S. currency

cheaper for buyers using other currencies.

* Workers at Chile’s state-owned Codelco, the world’s

largest copper producer, will start a nationwide strike on

Wednesday, a union official said.

* LME copper added 0.3% to $9,004 a tonne, aluminum

fell 0.1% to $2,525, lead gained 1.6% to $2,102,

nickel was little changed at $25,745 and tin was

up 1.5% at $31,275.

(Reporting by Eric Onstad

Editing by David Goodman)

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