METALS-Zinc touches four-month peak as concern about shortages grows

* Hedge funds, money managers add to bearish copper position

* Break above $1,790 in zinc to spur further buying

* Major Indonesian tin smelter halts operations

* Aluminium touches highest since October (Updates with closing prices)

By Eric Onstad

LONDON, Feb 22 (Reuters) - Zinc prices surged to a four-month peak on Monday and other base metals also gained as investors’ appetite for risk increased while they also worried about potential shortages.

Investor buying lifted industrial metals along with oil and equity markets, including shares in China, the world’s top consumer of metals.

“There’s higher risk appetite among market participants today which can be seen by the firmer Asian equity markets,” said analyst Daniel Briesemann at Commerzbank in Frankfurt.

“In most of the metals there’s tightening supply, which is most pronounced in zinc, followed by copper, and lead to some extent.”

Three-month zinc on the London Metal Exchange jumped to an intraday peak of $1,790 a tonne, the strongest since Oct. 23, extending a near 3 percent gain on Friday.

Zinc, which turned back after meeting resistance at its 200-day moving average at $1,790, closed 2.1 percent firmer at $1,781.

If it does manage to break its 200-day moving average, that would spark a flurry of technical purchases, traders said.

The closure of major zinc mines such as Century in Australia and Lisheen in Ireland has reduced supply, which has resulted in lower treatment fees charged by smelters.

Demand was also healthy, with data on Monday showing Chinese refined imports of zinc, mainly used for galvanizing steel, soared by 150 percent in January.

Also supporting zinc was a 7 percent rally in iron ore prices to more than $50 a tonne as evidence emerges of a revival in China’s steel industry.


LME copper gained 1.6 percent to finish at $4,694 a tonne after touching $4,701, the highest since Feb. 4, building on gains from the previous session.

Also supporting prices of copper, used in construction and power supply, China took further measures aimed at clearing a property overhang weighing on the economy.

But not all investors were convinced the rally was sustainable.

Hedge funds and money managers raised their bearish bets in copper in the week to Feb. 16, U.S. Commodity Futures Trading Commission data showed on Friday.

“We believe that throughout February, copper will continue to search for price direction, and we await the coming of spring before copper makes its next leg up or down,” Barclays analyst Dane Davis said in a note.

In other metals, LME aluminium marched 1.6 percent higher to close at $1,574 a tonne, the highest since Oct. 16. Lead dipped 0.1 percent to $1,728 and nickel climbed 2.1 percent to end at $8,755.

LME tin shed 0.3 percent to $15,730 a tonne despite news that major Indonesian tin smelter PT Refined Bangka Tin has ceased refining operations and its facility will be scrapped, according to a company shareholder.


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

Most active ShFE nickel

Three month LME tin

Most active ShFE tin