* Glencore to cut 500,000 tonnes of annual zinc production
* Global zinc market to swing into deficit -analyst
* Markets relieved that Fed seen holding off raising rates (Updates with closing prices)
By Maytaal Angel and Eric Onstad
LONDON, Oct 9 (Reuters) - Zinc surged 12 percent to a two-month peak on Friday and other base metals also rose strongly after commodities group Glencore said it would cut its zinc output by a third, sparking a short-covering rally across the board.
Zinc’s jump, its biggest one-day gain in at least a decade, followed Glencore’s announcement that it will cut 500,000 tonnes of annual zinc production, equivalent to around 4 percent of global supply, in its latest response to weak commodities prices.
The miner has already pledged copper and coal production cuts in response to prices at multi-year lows.
The rally is a shot in the arm for the beleaguered metals industry, many of whose members are heading to London for the annual LME Week celebrations which start on Monday.
“This (Glencore move) is big, it’s much bigger than the move in copper, it shifts the needle substantially. The rally is not going to all peter out, though having said that the jump today is in large part because of short covering,” BNP Paribas strategist Stephen Briggs said.
Zinc mine supply had already been set to shrink given the closure of MMG’s huge Century mine in Australia and Lisheen in Ireland this year.
“The cut is certainly significant and swings the zinc market into a deficit for 2016, which we estimate will now be around 300,000 tonnes, a reversal of the 180,000 tonne surplus we were forecasting earlier,” analyst Edward Meir at INTL FCSTone said in a note.
London Metal Exchange three-month zinc shot up to an intraday peak of $1,875 a tonne, a gain of 12.5 percent. That was its highest price since Aug. 11 and its biggest single-day gain in Reuters data, which goes back to mid-2005. It closed up 10.1 percent at $1,835.
Zinc prices sank to their lowest in over five years at$1,601.50 late last month, partly on an overhang of inventories.
Also supporting metals was a weaker dollar index, which fell on the view that the U.S. Federal Reserve is in no rush to raise interest rates, making commodities cheaper for buyers outside of the United States.
Lead, which is often mined alongside zinc, surged nearly 9 percent at one point to $1,821.50 a tonne, its highest since late July, before paring gains to close at $1,780, up 6.4 percent.
Copper climbed 3 percent to finish at $5,290 a tonne while aluminium gained 3.3 percent to end at $1,613.
Nickel raced 6 percent higher to a two-month peak of $10,785 a tonne before retreating. It failed to trade in closing open outcry activity and was bid at $10,500, up 3.2 percent. Tin added 1.6 percent to close at $16,150.
For metals, concerns persist about the growth slowdown in China, which consumes about half the world’s copper.
Senior metals executives in China expect most base metals will face tepid demand there next 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
Most active ShFE nickel
Three month LME tin
Most active ShFE tin (Additional reporting by Melanie Burton in Melbourne and Eric Onstad in London; Editing by David Evans and Susan Fenton)