October 24, 2018 / 10:49 AM / a year ago

CORRECTED-METALS-Base metals follow stock markets lower as dollar surges

(Removes erroneous reference to price in paragraph 2)

* All six LME industrial metals fall

* Zinc touches 3-week high on supply fears

* Zinc deficit grows to 76,200 tonnes in August-ILZSG

By Peter Hobson

LONDON, Oct 24 (Reuters) - Industrial metals prices fell on Wednesday, pushed lower by a stronger dollar and losses on global stock markets that reflected a lack of appetite for risky assets, though zinc touched a three-week high in earlier trading.

Benchmark zinc on the London Metal Exchange (LME) closed down 0.2 percent at $2,663 a tonne after reaching its highest since Oct. 2.

The metal used to galvanise steel has outperformed other industrial metals since hitting a 22-month low in August. It is up 16.5 percent since then.

“The driver is tightness in the market,” said Societe Generale analyst Robin Bhar, pointing to a large supply deficit, elevated prices for cash metal and falling exchange stockpiles.

“Although we are getting new mine supply, we don’t see the refined market balancing for a few more years.”

GLOBAL MARKETS: A cocktail of disappointing earnings, economic growth concerns, a spat between Italy and the European Union and the killing of a Saudi journalist were making investors nervous.

DOLLAR: The dollar surged to its strongest since mid-August, pressuring metals by making them more expensive for buyers with other currencies.

ZINC STOCKS: On-warrant zinc stocks in LME-registered warehouses — metal available to the market — have fallen below 100,000 tonnes from almost 240,000 tonnes in August and are close to 10-year lows. MZNSTX-TOTAL

SPREAD: The premium for cash zinc over the three-month LME contract, at $47, remains close to Monday’s $63 one-year high, signalling tight nearby supply. MZN0-3

TECHNICALS: “The technical picture (for zinc) is brightening after the price appears to have successfully exceeded the 100-day moving average, encouraging further buyers to jump on the bandwagon,” Commerzbank analysts said.

DEFICIT: The global zinc market had a deficit of 292,000 tonnes in the first eight months of the year, the International Lead and Zinc Study Group (ILZSG) said. In August the deficit was 76,200 tonnes.

CHINA STIMULUS: China, the largest consumer of metals, more than quadrupled the value of fixed-asset investment projects approved in the third quarter from the April-June period, as part of efforts to prop up the slowing economy.

ANTOFAGASTA: Chile’s Antofagasta revised its full-year copper production guidance to 705,000-725,000 tonnes from 705,000-740,000 tonnes.

NORSK HYDRO: The CEO of Norway’s Norsk Hydro said he expects a deficit in the aluminium market next year and is uncertain when an alumina plant in Brazil would resume full production.

PRICES: LME copper ended down 0.3 percent at $6,179 a tonne, aluminium finished 0.2 percent lower at $1,998, lead lost 0.6 percent to $2,005, nickel slipped 1.2 percent to $12,225 and tin closed 0.1 percent down at $19,275.

Additional reporting by Manolo Serapio Jr. Editing by David Goodman and Adrian Croft/Emelia Sithole-Matarise

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