Zinc starts to bubble as investors pile in (again) – by Andy Home (Reuters U.S. – July 20, 2016)


LONDON – Zinc is this year’s investment pick of the base metals traded on the London Metal Exchange (LME). The price of LME zinc for three-months delivery has risen by 42 percent since the start of January to a current $2,235 per tonne.

It is by a wide margin the strongest year-to-date performance among the LME pack and prices are now back at levels last seen in May last year. Also rising at a fast clip, though, is speculative interest on both the London and Shanghai markets.

Market open interest on the Shanghai Futures Exchange (ShFE) is surging, while speculative length in the LME is rapidly approaching those May 2015 peaks.

Investment money is betting on zinc’s supply-side story of raw materials crunch, a stand-out in a sector still overshadowed by the overarching demand-side narrative of Chinese slowdown.

But timing this story has always been tricky. Investors have got sucked into the zinc market before, most recently in May last year, when the London price peaked at $2,400 only to collapse back below $1,500 by the end of the year.

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