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    Source: Bloomberg

    Zinc climbs to record after inventory slumps to 15-year low

    Zinc advanced to a record in London after stockpiles of the metal used to galvanize steel plunged to the lowest in 15 years, creating a supply squeeze. Aluminium rose to the highest in five months.

    Stockpiles monitored by the London Metal Exchange dropped 2.7 percent to 110,800 metric tons, the exchange said today in a daily report. That's the lowest in April 1991.

    "Consumers have become very concerned about the availability of zinc," Michael Widmer, a London-based metals analyst at Calyon, said today by telephone. Calyon is one of 11 companies that trade on the LME floor.

    Zinc for delivery in three months on the LME rose as much as $70, or 1.7 percent, to $4,170 a metric ton, the highest ever. It traded $54 higher at $4,154 as of 11:28 a.m. Zinc headed for a fourth weekly gain, up 4.6 percent since Oct. 20.

    All LME inventories are in a slab form, which typically is not usable for galvanizers, the largest users of the metal, RBC Capital Markets wrote today in a report. Producers of galvanized steel accounted for 55 percent of global zinc consumption last year, according to the report.

    Widmer said he is most bullish about zinc for next year, expecting a supply shortfall to persist into at least the first few months of 2007.

    Global use will increase 3.9 percent to 11.1 million tons this year and 2.6 percent to 11.4 million tons in 2007, the International Lead and Zinc Study Group said on Oct. 9. China is the world's largest zinc user. The worldwide supply shortfall is forecast at 420,000 tons this year by Societe Generale.

    U.S. Growth
    Economic growth in the U.S. cooled to a 2 percent annual rate from July through September, the slowest this year, according to the median estimate of 78 economists in a Bloomberg News survey. The slowdown is after housing slumped and automakers slashed production to reduce stocks of unsold cars. The economy grew at a 2.6 percent pace in the second quarter.

    "The fact of the slowdown in growth is well-known, should not come as a surprise and should have been fully priced in," said John Kemp, a London-based analyst at Sempra Metals Ltd., in a report today.

    The Commerce Department is scheduled to release the report on third-quarter economic growth at 8:30 a.m. in Washington. The U.S. accounts for 14 percent in world copper consumption, and 19 percent in aluminium, according to Calyon.

    Aluminium gained $47 to $2,812. Earlier it rose as much as $49, or 1.8 percent, to $2,814 a ton, the highest since May 23 on a closing basis. A close at that level would bring this week's increase to 3.3 percent, a sixth straight week of gains.

    Aluminium Demand
    Prices of the lightweight metal used in beverage cans and aircraft have jumped 43 percent in the past year as demand from China and the U.S., the world's largest consumers of the metal. Shipment of aluminium rose 11 percent in the third quarter, Century Aluminium Co, the U.S. second-largest producer of the metal, said on Oct. 24.

    The LME index tracking prices of the six base metals traded on the exchange has dropped 5.4 percent since May 11 on concern that interest-rate increases in the U.S. would slow down the economy and curb demand for industrial metals.

    Also on the LME, copper gained $70, or 0.9 percent, at $7,520 a ton. Tin advanced $25 to $10,200, nickel jumped $550, or 1.8 percent, to $30,950 and lead added $20 to $1,580.

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