London zinc reaches its highest in almost a decade on China construction spend

Source:Reuters-Global Times Published: 2017/8/16 17:58:39

London zinc hit its highest in almost a decade on Wednesday as Chinese infrastructure demand that has fed a rally in steel prices for months spills into markets of steelmaking raw materials.

The rally in zinc, used for galvanizing steel, comes as China steps up plans to develop infrastructure while capacity cuts in its steel industry reform boost prices, said analyst Daniel Hynes of ANZ in Sydney.

"There [was] a fair level of skepticism at the start of the year when China's infrastructure projects were announced, but [now] we're seeing much better-than-expected growth in fixed asset investment," said Hynes.

"That resetting of expectations is resulting in much more positivity in the sector."

London Metal Exchange (LME) zinc peaked at $2,990 a ton, having cracked its November 2016 high to take prices back to their most expensive since October 2007.

China's strong economic growth showed visible signs of fading in July as lending costs rose and as the gravity-defying property market cooled, though activity levels generally remained solid, propped up by a year-long construction spree.

Fixed-assets investment still grew 8.3 percent in the first seven months of this year, even as it slowed from 8.6 percent in the first half.

Gains came even as Chinese steel and iron ore futures slipped for a fourth session as recent moves by the Shanghai exchange to increase trading charges kept the two commodities under pressure.

LME aluminum hit its highest since November 2014 at $2,065.50 a ton as Chinese capacity cuts extend to the sector in the Chinese government's drive to clean up its skies ahead of the winter heating season.

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