Unlike copper and aluminium, which have seen big reductions in supply overhangs in the last year, zinc supplies until recently far outweighed consumption of around 7 million tonnes.
But as of February 18, LME-held zinc stocks had tumbled by around 100,000 tonnes from year-earlier levels to 607,25 tonnes.
Three-month London Metal Exchange zinc futures in the last trading session surged to a 7-1/4-year high of 62 cents a pound, or $1,375 a tonne, as end users and speculators bet exchange-held stockpiles would further shrink.
World No 2 zinc producer Zinifex Ltd expects the zinc price to reach $1,570 a tonne, or 71 cents a pound, this year, underpinning a forecast net profit of A$190 million ($150 million) in the year ending June 30, nearly double its forecast in late 2004.
Zinifex shares have climbed as much as 36 percent since the start of January to A$3.18. Fellow zinc company Kagara Zinc Ltd is up 30 percent to a high of A$1.29.
Zinc's 10 percent price rise since the start of the year makes it the LME's biggest gainer of 2005.
In 2004, a 23 percent rise in LME zinc prices paled against a 38 percent gain in copper and a 33 percent increase in lead.
China was leading world demand for zinc, purchased by steel mills to keep rust away from galvanised steel -- used in everything from car bodies to skyscrapers, according to Goldman Sachs.
In 2005, China's consumption of the metal should grow around 12 percent, Goldman Sachs said. That's down from growth of 15.9 percent in China last year, but well ahead of a projected 2 percent growth rate for the rest of the world, it said.
The closely watched stocks-to-consumption ratio of zinc stockpiles was tipped by Goldman Sachs to remain below the critical four-week level until at least 2007.