* Fresh asset allocation lifts metals
* Options-related buying boosts zinc -Triland
* Coming up; FOMC minutes at 1800 GMT
(Adds details, closing prices)
By Eric Onstad
LONDON, July 9 Zinc steadied on Wednesday but
stayed near the previous session's 3-year high as investors held
firm to the view that the metal will face shortages due to mine
closures and is currently a good proxy for recovering global
Copper prices hovered near their highest in almost five
months, while aluminium touched a fresh 13-month top.
Three-month zinc settled at $2,281 a tonne, down
0.04 percent, having traded in positive territory for most the
day and held close to a three-year high of $2,318.50 seen on
Zinc has rallied 11 percent since the beginning of June as
forecasts of deficits have attracted buyers, and now the circle
of buyers seems to be widening, said Nic Brown, head of
commodities research at Natixis.
"It may be that the improvement in zinc prices is a
re-rating for commodities more generally among the investment
community as we get further and further into the economic
cycle," he said, noting that upbeat data recently has improved
the outlook for the U.S. and Chinese economies.
"You're looking for those commodities that are moving
increasingly into deficit, and of course zinc is at the top of
Zinc prices caught a lift on options-related purchases,
broker Triland said. "Volatility on zinc options has been well
bid in recent days as upside calls for Dec. 14 in particular
have been bought. This has echoes of similar strategies in
nickel earlier this year."
The brighter growth outlook has also helped lift copper and
aluminium, and news of tighter supply-demand fundamentals
Copper ended up 0.36 percent at $7,156 a tonne after
hitting its highest since Feb. 19 on Tuesday at $7,212 a tonne.
Prices were inching towards the February top of $7,220, opening
the way to levels last seen in late January, traders said.
Copper prices have rallied about 7 percent since mid-June to
above $7,000 a tonne, driven by a lack of supply and a chart
picture that has encouraged fresh allocation by funds.
China's moves to loosen monetary policy have also fed the
copper rally, which may stretch further after Wednesday's
relatively benign inflation data handed policymakers scope for
fresh action, said Jonathan Barratt, chief executive of
commodity research firm Barratt's Bulletin in Sydney.
"CPI lower than expected indicates support for the story of
stimulus. (Premier Li) has got room and money to move. And I
think that's been the core that over the last couple of weeks
that has seen metals prices higher," he said.
China's consumer inflation cooled slightly more than
expected in June, pointing to lingering weakness in the
Dwindling copper supplies also have underpinned prices.
Chile's Codelco has asked certain buyers of
refined copper in China to cancel some term shipments scheduled
for delivery in the second half of the year as the firm
processes less ore from a new mine, three sources said.
Among other metals, aluminium hit a new 13-month
peak of $1,959 a tonne before trimming gains to end at $1,950 a
tonne, up 0.6 percent.
Alcoa Inc has increased its estimate for the global
aluminium market deficit this year due to capacity cuts in
China, the world's No. 1 producer, a senior executive said on
Lead ended down 0.99 percent at $2,195 a tonnes, tin
shed 0.98 percent to $22,280 a tonne while nickel
ended down 1.26 percent at $19,525 a tonne.
The export of hidden Chinese tin stocks is likely to be
behind a puzzling rise in London Metal Exchange (LME)
inventories that has frustrated investors who expected to see
shortages this year.
Three month LME copper
Most active ShFE copper
Three month LME aluminium
Most active ShFE aluminium
Three month LME zinc
Most active ShFE zinc
Three month LME lead
Most active ShFE lead
Three month LME nickel
Three month LME tin
(Additional reporting by Melanie Burton; and Maytaal Angell;
editing by Jane Baird and Keiron Henderson)