The rally in the metals market is on the rise as Bloomberg Industrial Metals sub-index posted the biggest five-day gain since 2011, with zinc touching a nine-year high.
Zinc, which is used as a coating on iron and steel to protect against corrosion, is the best performer among 22 raw materials on the Bloomberg Commodity Index this year, with the metal rallying 80 percent this year, poised for the steepest climb since 2009.
The metal will be in deficit through 2018, Bloomberg Intelligence analysts Kenneth Hoffman and Zhuo Zhang wrote in a note Monday.
Prices rallied after China’s top economic commission approved a $36 billion plan on new rail links around Beijing, boosting demand for industrial raw materials.
Zinc for delivery in three months rose 2.9 percent to settle at $2,900 a metric ton at 5:50 p.m. on Monday, November 28, on the London Metal Exchange, after touching $2,985, the highest since October 2007.
The metal’s volatility, measured in price swings in options, is at the highest since 2010. Lead is up 18 percent since Nov. 18, the biggest six-day advance since June 2009.
Investors see zinc as the metal with the tightest supply situation “given the multitude of closures that have taken place over the past two years,” Meir wrote.
Industrial metals rallied almost 30 percent in 2016 as demand stabilised in China, U.S. President-elect Donald Trump pledged to invest in infrastructure and revitalise the U.S. economy, while mine closures curbed supply. Chinese investors have added to the speculative binge.
Copper for delivery in three months rose less than 0.1 percent to $5,881, and broke above $6,000 during the Asian trading day on Monday, bringing call contracts at that price into the money.
