Zinc settled up 0.31% at 144.05 as speculation mounted that global demand will exceed supplies and climbed to its highest in 10 days and trading near three-year peak after better-than-expected Chinese factory data calmed fears about economic growth in the world's biggest metals consumer. News that China's factory sector grew at the fastest clip in 18 months in July prompted investors to shrug off news that Indonesia may soon resume copper concentrate exports that could smooth out kinks in supply. Zinc inventories monitored by the London Metal Exchange have tumbled 30 percent this year to 653,900 metric tons, the lowest since December 2010. Meanwhile Goldman Sachs Group Inc. forecasts a global production deficit will widen to 154,000 metric tons next year. Zinc prices gained as the closure of some large mines supported the prices, also demand is expected to outpace supply, and will grow by 4.5% y-o-y to 13.58m tonnes in 2014. Demand for zinc increased in China, by 8% in 2013 y-o-y, and is expected to be higher by another 6% in 2014. With demand expected to exceed supply by 0.12m tonnes in 2014, zinc prices are likely to be shaped by how quickly the new capacity additions come online to replace the lost supply. The market will also continue to be closely tied to the construction and automobile industries, with the continuing growth expected in these sectors likely to support zinc prices in coming months. Technically market is under short covering as market has witnessed drop in open interest by -7.25% to settled at 5792 while prices up 0.45 rupee, now Zinc is getting support at 143.3 and below same could see a test of 142.6 level, And resistance is now likely to be seen at 144.9, a move above could see prices testing 145.8.

Trading Ideas:

Zinc trading range for the day is 142.6-145.8.

Zinc settled up as speculation mounted that global demand will exceed supplies.

Zinc inventories monitored by LME have tumbled 30 percent this year to 653,900 metric tons, the lowest since December 2010.

Goldman Sachs Group Inc. forecasts a global production deficit will widen to 154,000 metric tons next year.