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METALS-Zinc highest in a decade as industrial metals surge

* LME/ShFE arb: http://tmsnrt.rs/2oQ5nm20 (Updates prices)

LONDON, Aug 16 (Reuters) - Zinc prices surged to their highest level in almost a decade on Wednesday while aluminium and copper prices were at their highest since 2014 as rises across most industrial metals triggered pre-set buy orders and a wave of speculative buying.

"Momentum funds are buying the strength, piling in as the price rises," a metals trader in London said. However, forward selling by producers keen to lock in a high price was limiting gains, he said.

Expectations of strong global demand and tight supplies had supported the rally, said Danske Bank analyst Jens Pedersen. "(But) these levels are likely too high from a market fundamental point of view," he said.

LME ZINC: Benchmark zinc on the London Metal Exchange was up 5.1 percent at $3,117.50 a tonne at 1455 GMT, on track for its biggest gain since November and rising above the key technical level of $3,000 for the first time since October 2007.

ZINC: The metal used to galvanise steel is benefiting from Chinese infrastructure development and higher steel prices caused by capacity cuts, ANZ analyst Daniel Hynes said.

SWITCH: Chinese traders were also diverting money from steel to zinc on the Shanghai Futures Exchange after a hike in steel trading fees.

CHINA ECONOMY: Strong growth in the world's largest consumer of metals showed signs of fading in July but a construction spree kept activity solid, while the International Monetary Fund raised its 2018-2020 average growth forecast.

CHINA OUTPUT: China's zinc production fell in July, while lead output rose.

ZINC STOCKS: Supporting prices was a fall in on-warrant zinc available to the market at LME-registered warehouses of 5,500 tonnes, to 149,700 tonnes. Headline zinc stocks have tumbled 41 percent this year. <MZNSTX-TOTAL>

LME ALUMINIUM: Three-month LME aluminium was up 2.1 percent at $2,092 a tonne after touching $2,096, the highest since September 2014.

CHINA CUTS: Output fell 8.2 percent in July as capacity cuts started to take their toll. China makes more than half the world's aluminium.

HONGQIAO: The country's biggest producer, China Hongqiao Group, shut 2.68 million tonnes of capacity.

ALUMINIUM SPREAD: Tight supplies on the LME market created a premium for the cash over three-month contract <MAL0-3> for the first time since February. The premium was $6 a tonne.

COPPER: Benchmark copper was 2.5 percent higher at $6,540, its highest since November 2014.

FREEPORT: Flash floods left one worker missing and damaged a power plant at a facility operated by U.S.-owned miner Freeport in Indonesia.

PRICES: Nickel was up 3.8 percent at $10,755, lead was 4.4 percent higher at $2,490 and tin was down 0.3 percent at $20,040 a tonne.

(Additional reporting by Melanie Burton, editing by David Evans and Susan Thomas)