Shanghai zinc firms on China steel outlook

5 July 2017

Shanghai zinc futures closed sightly higher on Tuesday amid expectations the metal's fundamentals had turned a corner, thanks to a robust outlook for Chinese steel.

China's steel rebar futures prices are the highest in more than three years. Demand for rebar got a boost from China's infrastructure spending this year, fattening margins among producers.

Zinc is used to galvanise, or rust-proof steel. * ZINC: London Metal Exchange three-month zinc contracted 1 percent to $2,776 a tonne, returning overnight gains. Still, the LME zinc price is up more than 10 percent since June 7.

* ShFE Zinc ended 0.61 percent higher at 22,940 yuan ($3,375)a tonne

* CHINA GROWTH: China's manufacturing sector reversed into growth mode in June, expanding at the fastest pace in three months after unexpectedly contracting in May, as new orders and production rose.

* SHORTAGES: Macquarie expects a 650,000-tonne zinc shortfall this year and sees prices breaching $3,000 a tonne by the fourth quarter. Societe Generale's Robin Bhar is not so bullish and expects a deficit of 250,000 tonnes this year.

* INVENTORIES: Zinc stocks in LME-approved warehouses at 289,275 are down more than 30 percent this year, while those monitored by the Shanghai Futures Exchange have tumbled nearly 60 percent to less than 65,000 tonnes.  Three-month copper on the London Metal Exchange dropped 0.88 percent to $5,878 a tonne by 0700 GMT, extending losses from the previous session.

* The most-traded copper contract on the Shanghai Futures Exchange dropped 0.97 percent to 46,920 yuan a tonne.

* NICKEL RETHINK: Brazil's Vale is reassessing its loss-making New Caledonian nickel operations as part of a wider review of low performing assets after new Chief Executive Fabio Schvartsman took charge last month.