* Zinc breaks 200-day moving average
* Historically low zinc inventories offer price support
(Updates with closing prices)By Pratima DesaiLONDON, Jan 20 (Reuters) - Zinc prices rose to two-monthhighs on Monday after a break of key technical levels triggereda flurry of buying and as the market worried about historicallylow inventories.Benchmark zinc on the London Metal Exchange (LME)ended 0.6% up at $2,444 a tonne.
Prices of the metal used to galvanise steel earlier touched$2,448, the highest since Nov. 13 and a gain of more than 10%since early December."The 200-day moving average around $2,440 gave way andstarted the short-covering," one zinc trader said, referring tothe closing of bets on lower prices. "It does pave the way for$2,500-$2,550, but that may need a lot more momentum."
TECHNICALS: Strong resistance is seen at $2,480, a Fibonacciretracement level, while any reversal of the uptrend will onlysee support kick in at about $2,350, where the 21, 50 and100-day moving averages are converging.STOCKS: Stocks of zinc in LME-approved warehouses are closeto 20-year lows at about 50,000 tonnes, having been on adowntrend since October 2015. Visible inventories - including those on the LME, inwarehouses monitored by the Shanghai Futures Exchange and thoseheld by producers - are estimated at about 1.1 million tonnes.
That number is also very low, equating to about 30 days ofglobal consumption rather than normal 50 days.Global consumption is estimated at 14 million tonnes thisyear.DEMAND: The China Iron and Steel Association recentlyforecast Chinese steel demand of about 890 million tonnes for2020, up 2% from 2019. SPREADS: Worries about nearby availability of zinc on theLME market have pushed cash metal to a premium of nearly $20 atonne over the three-month contract, having been at a discountin December.
CHINA: Prices of industrial metals overall were supported byexpectations of stronger demand from top consumer China, wheredata shows growth and demand stabilising, and optimism aboutimproving U.S-China trade relations. Chinese industrial output in December rose 6.9% from a yearearlier, its strongest growth in nine months and above anexpected 5.9%. Fixed-asset investment rose 5.4% for the fullyear, but growth had plumbed record lows in the autumn."We see scope for stabilisation in China and a de-escalationof the trade dispute," Bank of America Merrill Lynch analystssaid in a note, adding that this and a lack of mine supplygrowth is likely to support copper.OTHER METALS: Copper closed 0.2% down at $6,259 atonne, aluminium was up 0.4% at $1,812, lead lost 0.8% to $1,961, tin gained 0.2% to $17,850 andnickel added 0.8% to $14,025. (Reporting by Pratima DesaiEditing by Kirsten Donovan and David Goodman)