LONDON, Feb 22 Reuters Fund managers have been scaling up short positions on zinc, betting that this year39;s weakest base metals price performer has further downside.

Investment fund positioning is now the most bearish it39;s been since the London Metal Exchange LME first launched its Commitments of Traders Report in 2018.

LME threemonth zinc , currently trading around 2,400 per metric ton, is already down by 8 on the start of the year.

Zinc39;s use in galvanised steel means it is heavily exposed to the fortunes of the ailing global construction sector, particularly that in China.

The global zinc market is generating a lot of surplus metal, some of which has just turned up in LME warehouses, lifting stocks to the highest level since June 2021.

More may be on the way judging by LME timespreads but with the price now eating into the cost curve, just how much further can zinc fall?

BEAR ATTACK

Fund managers lifted short positions on the LME zinc contract to 60,492 contracts, or just over 1.5 million tons, as of the close of business last Friday. The previous record short positioning of 54,935 contracts occurred in August last year.

There are still plenty of investment funds keeping the faith with zinc after the LME price bounced off a sixmonth low of 2,278 on Feb. 12.

But even on a net basis the collective short of 18,012 contracts is still the largest since 2018, exceeding the previous point of maximum bearish positioning seen in February 2020, when China was…