Yet data such as warehouse stock levels suggest further significant gains are unlikely.
Massive stimulus measures by Chinese authorities to offset the damage to economic growth from COVID-19 lockdowns has boosted demand for zinc and steel. Global zinc demand is estimated at around 14 million tonnes this year.
Benchmark zinc prices on the London Metal Exchange touched $2,525 a tonne this month, a gain of 11% since the start of the year compared with nearly 9% for copper and a small loss for aluminium.
Graphic: Zinc outperforms https://fingfx.thomsonreuters.com/gfx/ce/jznvnxzgevl/Zinc%20outperformance.PNG
"Strong galvanised steel production in China is behind zinc's rally," a source at a commodity trading firm said. "But LME stocks are up, meaning weakness outside China and excess supply."
Data from the World Steel Association shows global crude steel production fell 2.5% to 152.7 million tonnes in July from a year earlier, but in China output jumped more than 9% to 94.4 million tonnes.
Graphic: Crude steel production https://fingfx.thomsonreuters.com/gfx/ce/ygdpzmwgqvw/crude%20steel.PNG
"The bulk of (China's) galvanised steel-consuming sectors such as autos and machinery are gathering momentum," analysts at Macquarie said in a note.
"We calculate using (China's) year to date growth figure that highway investment has grown by an average of 12% since May and railway by almost 20%, despite a cooling evident in July," the Macquarie analysts said.
The strength of Chinese demand is seen in zinc prices and tumbling stocks in warehouses monitored by the Shanghai Futures Exchange <ZN-STX-SGH>, which at 77,629 tonnes have dropped more than 50% since March.
Graphic: LME zinc stocks and prices https://fingfx.thomsonreuters.com/gfx/ce/yzdpxxreypx/LME%20zinc%20stocks%20and%20prices.PNG
Outside China however, the coronavirus crisis is still taking its toll. Analysts at Citi expect the zinc market surplus to climb to more than 500,000 tonnes from a shortfall of 231,000 tonnes in 2019.
Some of that surplus has already found its way to LME registered warehouses <MZNSTX-TOTAL>, where stocks at 224,300 tonnes compare with a number below 50,000 tonnes in February.
Ample supplies on the LME market have seen cash zinc over the three-month contract trade at a discount of $26 a tonne, the highest since April 2017 <CMZN0-3>.
Graphic: Shanghai zinc stocks and prices https://fingfx.thomsonreuters.com/gfx/ce/nmopaqjzxpa/Shanghai%20zinc%20stocks%20and%20prices.PNG
By Pratima Desai