Zinc settled up 0.96% at 126.05 boosted by hopes of a pickup in demand after the Chinese New Year and by limited short-term availability of the metal in the physical market. Zinc producers are raising the premium they charge customers for refined metal as a shortfall begins to emerge due to mine closures and strong Chinese demand. Supplies of zinc have been rapidly declining. The global refined zinc market was undersupplied by 18,000 metric tons in the first 11 months of 2013, according to the International Lead and Zinc Study Group. This compares with a surplus of 179,000 tons in the same period of 2012. Mining companies are shutting down zinc-output facilities in mining hubs such as Canada and Australia because reserves in those mines have largely been depleted. Premiums--charges on top of the London Metal Exchange price for delivery of special high-grade zinc--have risen to around $180-$200 a metric ton this year, from $120-$130 a ton last year, a gain of nearly 70%.Stockpiles of the metal held in LME warehouses currently stand at 828,575 tons, down 32% since the start of 2013. Japan's biggest producer, Mitsui Mining & Smelting, has also raised its zinc premiums for 2014 by around 70%, underpinned by rising demand. Imports of refined zinc into the country rose more than a fifth in 2013, according to customs data. Now Zinc is getting support at 125.3 and below same could see a test of 124.4 level, And resistance is now likely to be seen at 127.1, a move above could see prices testing 128.

Trading Ideas:

Zinc trading range for the day is 124.4-128.

Zinc gained boosted by hopes of a pickup in demand after the Chinese New Year and by limited short-term availability of the metal in the physical market.

The global refined zinc market was undersupplied by 18,000 metric tons in the first 11 months of 2013 - ILZSG

Zinc producers are raising the premium they charge customers for refined metal as a shortfall begins to emerge due to mine closures and strong Chinese demand.