ZINC 0.08% $2,575.9 zinc futures

zinc hits record peak drags others higher...

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    Source: www.kitcometals.com

    Zinc hits record peak drags others higher
    Fri Oct 27, 2006 12:38 PM GMT

    By Anna Stablum

    LONDON (Reuters) - Dwindling stocks pushed zinc to fresh highs on the London Metal Exchange (LME) on Friday, but copper sentiment was dampened by concerns of rising inventory levels in China.

    "Apart from zinc and aluminium, these markets have been trading sideways throughout the week," an LME trader said.

    He said that the supply side remained tight for most metals and a price move could only be triggered by demand.

    "Any falls would have to come from the demand side, likewise, if we have a good U.S. figure out today then these prices could well move higher," the trader said.

    The market saw little activity in early trade, ahead of the U.S. third quarter GDP figure due out by 1230 GMT.

    Copper for delivery in three months
    London prices have been weighed down recently by large increases in stocks, up by 13 percent over the past week with more to be expected.

    Copper inventories climbed 25 tonnes to 126,750 on Friday.

    In Shanghai, around 20,000 tonnes of copper arrived this week, of which more than 1,000 tonnes had been sold.

    Dealers said in terms of the physical market, sentiment was neutral to slightly bearish in the short term.

    Zinc touched a new record high of $4,170 in early trade and was indicated at $4,145/4,155 versus $4,100.

    The price of zinc has more than doubled since the start of 2006, while stocks have fallen by over 80 percent since their peak in mid-2005.

    Zinc inventories in LME warehouses were at their lowest in more than a decade at 110,800 tonnes, down by 3,100, against average daily world consumption of around 29,000 tonnes.

    "The other metals look strong and could move higher... but copper is a bit of a dragging anchor at the moment," analyst William Adams at BaseMetals.com said.

    China will raise the export tax on copper, nickel, aluminium and other metal products to 15 percent, the Ministry of Finance said on Friday.

    "Higher export taxes should reduce the incentive to import raw materials and only to process them into semi-finished commodities for export," analyst John Kemp of Sempra Metals said in a research note.

    "That should in turn curb China's voracious appetite for items such as iron ore, copper concentrates, etc, and help drive down international prices for them."


    Aluminium was indicated at $2,808/2,813, up 1.8 percent versus Thursday's close of $2,757.

    Physical demand in Europe supported aluminium, even if U.S. demand was sluggish, a Triland report said.

    Traders would watch U.S. growth data for the third quarter due at 1230 GMT to glean a better view of how the economy is holding up and the extent of inflation risk.

    Also, the final Michigan consumer sentiment reading for October is due at 1400 GMT.

    Nickel was indicated at $30,850/31,050, rebounding from the previous session's lower close at $30,350.

    On Thursday, the metal fell by 4 percent after a jump in stocks of 1,086 tonnes to 6,834. Stocks rose to 7,140 on Friday.

    © Reuters 2006. All Rights Reserved.

    Cheers, Pie

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