Zinc Declines in Asia as Supply Little Changed by Earthquake

May 21 (Bloomberg) - Zinc declined on the London Metal Exchange on expectations that output cuts in China after last week's earthquake would have little effect on global supply.

Production may drop by 60,000 metric tons, or 1.5 percent of this year's estimated output, because of smelter damage, Beijing Antaike Information Development Co. said yesterday. The May 12 quake in Sichuan, China's strongest in 58 years, halted some metals production in the region.

"It's time to sell," said Cai Jie, a trader at Minmetals Starfutures Co., by phone from Shenzhen today. "Zinc is heavily oversupplied, so the estimated loss could hardly change fundamentals."

The metal, used to galvanize steel, will have a surplus of 215,000 metric tons this year after global production expanded, the International Lead and Zinc Study Group said April 24.

Zinc for delivery in three months on the London exchange fell as much as 1.8 percent to $2,235 a ton and traded at $2,240 at 3:00 p.m. in Shanghai. The contract jumped 9.8 percent last week, the biggest weekly gain since November, on concern the quake would disrupt supplies.

Zinc for July delivery fell 2.1 percent to close at 18,120 yuan ($2,603) on the Shanghai Futures Exchange. The special metal for immediate delivery in Changjiang, Shanghai's biggest cash market, traded between 18,200 and 18,850 yuan a ton today.

"Physical buying was very poor as China's government credit tightening curbed demand," said Cai.

Zinc Mining

Chinese zinc miners in Sichuan province have halted ore production on government orders after the quake, according to researcher CBI China Co. Lead miners in the region are almost certain to have halted too, according to Beijing Antaike Information Development Co.

Sichuan, Shaanxi and Gansu together produce around 20 percent of the nation's zinc and lead concentrate, 20 percent of the nation's refined zinc yet very little of the lead metal.

Still, "halted mining in the quake region is having a limited impact as domestic ore supplies are quite ample and prices of imports are attractive," said Zhu Yiman, a CBI analyst from Shanghai.

Shanghai copper declined 1 percent to close at 62,330 yuan and Shanghai aluminum fell 1.7 percent to 18,950 yuan.

Among other LME traded metals, copper was down 0.6 percent to $8,278 a ton, aluminum slid 0.4 percent to $2,986, nickel was unchanged at $26,000, lead fell 1.2 percent to $2,144.75, and tin was down 0.1 percent to $23,650.