China-driven rally sends zinc, lead to multi-year peaks

Zinc soared to a nine-year high on Monday and lead hit a five-year peak as reports of more infrastructure investment in China and signs of strong property investment in the world's top metals user sparked heavy buying. Zinc, used to galvanise steel, was the biggest winner as Chinese steel futures jumped to 31 month-highs, driven also by a rotation of funds into risky assets, supported by optimism over global growth into 2017.

China on Monday approved a 247-billion-yuan ($36 billion) railway plan to improve transport links in the country. China's real estate investment growth meanwhile quickened in October to its highest since April 2014. “We’re in the midst of Chinese credit boom at the moment, social financing been growing strongly in the last few months ...(but) I think we're starting to run into overbought territory,” said Oxford Economics commodities analyst Dan Smith.

“On the supply side in zinc the biggest concern is that the cutbacks that have been implemented by the likes of Glencore will come back if prices go too high.”

London Metal Exchange zinc surged more than five per cent to $2,970 a tonne, its highest since October 2007. By 1147 GMT, zinc had retraced to $2,894.50. Lead jumped more than seven per cent to $2,564.50, its highest in more than five years.

In Shanghai, zinc and lead surged as much as seven per cent, while steel rebar rose as much as 6.4 per cent to its loftiest since May 2014. In a bid to tame speculation and surging prices, the Shanghai Futures Exchange said it will limit the size of positions taken by non-members in some steel rebar futures. Sentiment in base and ferrous metals remained bullish, however.

Boosting risk appetite, the Organisation for Economic Cooperation and Development said it saw global growth picking up faster than previously expected in the coming months.

Also in China, weekend data showed profit growth in the industrial sector picked up in October, suggesting a further strengthening of the world's second-largest economy.

Zinc is the best performing LME metal this year, surging nearly 80 per cent this year on fears that closures and suspensions of major mines will lead to shortages. Lead is often mined in the same deposits as zinc. LME copper rose over nearly three per cent to a high of $6,045.50, its highest in just over a year.

December's holiday slowdown period could soon put a cap on copper, which is heading for its biggest monthly gain in more than a decade in November, said Bonnie Liu, general manager of GF Futures