Shanghai zinc and nickel surged on Monday on the back of a sustained crackdown in China's polluting steel industry, which fuelled worries about supply of the construction material and lifted prices of its raw materials. Both metals were jolted out of a downtrend that last week saw them touch their lowest for the year amid concerns about a slowdown in China's metals demand. The rally in steel prices also caught short-holders by surprise and forced them to cover their positions.
"It's all very macro-driven at the moment," said analyst Daniel Morgan at UBS in Sydney. He said that the metals market, including steel, was overheated in the first quarter given strong growth in top consumer China, but the country's recent shift towards credit tightening had pushed the sector to overcorrect.
"When it's all done and dusted, I think this year will have been a reasonable year for commodities." Shanghai Futures Exchange zinc surged more than 5 percent before paring gains to 22,195 yuan ($3,221), still up 4.2 percent. London Metal Exchange zinc also cut gains to half a percent at $2,631.50, having earlier struck its highest in two weeks at $2,667, the most expensive since May 2. SHFE nickel jumped 2.4 percent, while LME nickel was off earlier highs, but still up 0.3 percent.
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