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Zinc futures surge on supply shortages

By Wang Lan (China Daily)
Updated: 2008-02-22 09:48

All six Shanghai futures products rose sharply yesterday, with zinc surging to the daily allowable limit on expectations of strong demand and short supply after recent blizzards halted production.

All 12 zinc futures contracts for delivery in different months on the Shanghai Futures Exchange (SHFE) soared to their daily allowable limits. The most actively traded zinc futures contract for delivery in May jumped 4.2 percent to close at 20,525 yuan per ton.

Meanwhile, the most actively traded copper futures contract for delivery in May on the SHFE rose for the fourth consecutive day to 2 percent, closing at 67,550 yuan per ton. Copper contract prices for May delivery climbed an aggregate 15.7 percent from a month ago.

Power disruptions in provinces hit hard by recent snowstorms forced many zinc and other metal manufacturers to suspend part or all of their production.

Repair of infrastructure damaged in the blizzards is expected to create strong demand for a wide range of raw materials, analysts said.

"Serious production disruptions in Yunnan and Guizhou provinces have further upset the supply and demand balance," said Zhou Jie at China International Futures (Shanghai) Co.

Analysts said the flood of speculative capital into the international and domestic commodities markets has exacerbated the price surge.

"Intensified concern about rising global inflation has triggered a buying spree in commodities," said Zhou. The rapidly depreciating US dollar against most major world currencies has made buying commodities a safe bet for investors because trading in those commodities is settled in the US currency.

"Expectations of further US dollar depreciation also pushed up prices of commodities in the global markets," said Liu Chao, an analyst at Xiangcai Qinian Futures Co in Shanghai.

"Investors are rushing into commodities to seek refuge in anticipation of an upswing in energy and metals prices."

Zhu Mingyuan, an analyst at Xinguolian Futures Co in Shanghai, said: "The upward momentum of commodity futures in London and New York also helped drive up prices in the Chinese commodity markets."

On the London Metals Exchange, the three-month copper futures contract rose 1.39 percent in yesterday's electronic trading to reach $8,268 per ton.


(For more biz stories, please visit Industry Updates)



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