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MELBOURNE: London zinc touched its highest in 15 months on Friday as fresh shutdowns in China's steel sector added to mine supply concerns to ignite a short-covering rally.
China plans to cut steel production by 2.91 million tonnes this year in inner Mongolia, a government official said, according to state media.
As China steel mills shutter, steel prices lift, meaning the remaining mills can pay more for ingredients such as zinc.
The news pushed investors to cover short positions in a market already beset by tight supply.
"Zinc has definitely been the outperformer. It is coming from supply constraints with last year's closure of big mines," said strategist Vivek Dhar of Commonwealth Bank Australia. "Stronger-than-expected steel output in China this year has also helped boost zinc demand and prices."
LME zinc rallied to its highest since May 2015 at $2,327.50 a tonne, before trading at $2,319 a tonne by 0714 GMT, up 0.9 percent, and bringing the year´s gains to 44 percent.
Volumes were huge, at more than 8500 lots, more than double the exchange´s flagship copper contract.
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