Zinc to snap six-day win streak as industrial metals stumble

Zinc prices fell and were set to snap a six-day win streak on Thursday, as a firm dollar offset support from thin availability outside China and also dragged other industrial metals down.

Benchmark three-month zinc CMZN3 on the London Metal Exchange (LME) fell 0.96% to $3,855.5 a metric ton by 0700 GMT. The most-traded zinc contract on the Shanghai Futures Exchange (SHFE) <SZNcv1> was down 0.44% at 26,140 yuan ($3,889.71) a ton.

The U.S. dollar index =USD has gained 0.33% this week, as the market prepared for U.S. Federal Reserve Chairman Kevin Warsh's anticipated speech at Jackson Hole.

A stronger dollar weighs on greenback-denominated commodities by making them more expensive for buyers using other currencies.

Zinc's decline would cap an impressive rally that pushed the metal to its highest level on the LME in more than four years on Wednesday, and which had echoes of last October's squeeze.

Concerns about availability of the metal, which is mostly used to galvanize steel, manifested in a wide LME cash-to-three month backwardation CMZN0-3, and data showing refined zinc supply switching into a deficit in June have supported prices.

But Wednesday's total LME stocks MZNSTX-TOTAL at 97,325 tons were nearly triple the lows of the October squeeze, leading some analysts to downplay the influence of the supply shortage, pointing instead to support from speculative positioning on the LME.

"Yes, there is physical tightness outside China, but not as bad as last year and it does not justify current prices," Sandeep Daga, head of research at Metal Intelligence Centre, said.

Among LME metals, copper CMCU3 was steady, aluminium CMAL3 dipped 0.2%, lead CMPB3 lost 0.37%, nickel CMNI3 was little changed, down only 0.04%, and tin CMSN3 added 0.15%.