Three months zinc on the London Metal Exchange, which has risen more than 20 percent in value in the last year, hit a high of $1,255.50 - levels last seen in November 1997.
By 1057 GMT, it had retreated slightly to $1,240/$1,245 a tonne, against the Wednesday kerb close at $1,243.
Analysts said zinc, which has been the laggard in the base 2004 metals bull-run, is likely to outperform the rest of the complex next year. "It has virtually reached the $1,250 target, and looking for further testing of this area during the current upmove. Clearly, through $1,250 it will signal $1,300 initially," LME trader Triland Metals said in its daily report.
On Thursday, zinc stocks in the LME's warehouses dropped 2,675 tonnes to 631,325 tonnes, the lowest since September 2002, and about 17 percent less than a year ago.
Standard Bank London noted in its monthly report that inventories elsewhere have fallen as well - producer stocks are down some 65,000 tonnes this year, while the US Defence Logistics Agency (DLA) holdings have shrunk by 26,000 tonnes.
Total global inventories now equate to around 5.5 weeks of demand, against 6.4 weeks at the end of 2003. The sizeable deficits in 2005 and the following year will see a stocks/consumption ratio of just three weeks in 2006, Standard Bank said.
On the consumption side, China now consumes about one-fifth of the world's zinc, and demand has been forecast by analysts to rise between 11 percent and 18 percent in 2005.
World zinc consumption will be 260,000 tonnes greater than output this year, AME Mineral Economics said on Wednesday.
The Australian research group said it expected the supply deficit to widen to 280,000 tonnes next year.