Zinc eases from four-year high as US rate hike prospects rise

Zinc eased from a four-year high near $4,000 on Friday as Federal Reserve Chairman Kevin Warsh said the U.S. central bank could have "work to do" to rein in inflation, the closest he has come to acknowledging interest rate hikes may lie ahead.

Benchmark LME three-month zinc CMZN3 was down 0.3% to $3,872 per metric ton at 1416 GMT. It earlier rose as much as 1.8% to $3,955, its highest since May 2022, on dwindling inventories.

"We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed. Otherwise, we have work to do," Warsh said in a speech to economists at Jackson Hole.

Traders added to bets on a September rate hike after his remarks. Higher interest rates can weigh on industrial metals prices by strengthening the dollar and cooling manufacturing demand.

LME stocks data earlier showed 19,125 tons of fresh zinc warrant cancellations, or orders to remove metal from warehouses, mostly in Singapore. That reduced available zinc stocks MZNSTX-TOTAL to 75,600 tons, or around two days of global consumption.

"If inventories continue to flow out ... tight spot supply may continue to support zinc prices," broker Marex said in a note. "However, if high prices attract large quantities of metal back into LME warehouses, the rebound in inventories could quickly alleviate tensions."

The cash LME zinc contract was around $160 a ton higher than the three-month forward CMZN0-3, indicating near-term tightness.

Zinc, used to galvanise steel, was poised for a 6.4% gain in August, which would mark its strongest month since January.

The LME is closed on Monday for a public holiday in Britain.

Copper CMCU3, also supported by low inventories lately, was up 0.1% to $14,292.50 a ton, within striking distance of its all-time peak of $14,527.50. SHFE copper stocks CU-STX-SGH plunged by 19.1% to 72,428 tons from last week.