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
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
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
Graphic: Shanghai zinc stocks and prices https://fingfx.thomsonreuters.com/gfx/ce/nmopaqjzxpa/Shanghai%20zinc%20stocks%20and%20prices.PNG
By Pratima Desai