Zinc Markets Slip as Recession Concerns Rise, MCX Drops

Price

• LME: As of yesterday, LME zinc opened at $2,650.50/ton, reaching a high of $2,662.50/ton, hitting a low of $2,575/ton, and eventually closing at $2,612/ton, down $30/ton, a decline of 1.14%. Today, LME zinc trading commenced at $2,597.50/ton.
• SHFE: As of yesterday, the most-traded SHFE 2409 zinc contract opened at 21,990 yuan/ton (lowest level), reached a high of 22,210 yuan/ton, and eventually closed at 22,120 yuan/ton, down 20 yuan/ton, a decline of 0.09%. Today, SHFE zinc trading commenced at 21,895 yuan/ton.
• MCX: As of yesterday, zinc prices opened at ₹247.50/kg, reached a high of ₹247.90/kg, a low of ₹244.60/kg, and finally closed at ₹247.45/kg, a drop of ₹0.05 or 0.02%. Today, MCX zinc trading commenced at ₹247.75/kg.

Demand and Supply

• LME Opening Stock: 247,825 | Live Warrants: 228,475 | Cancelled Warrants: 19,350
• LME Zinc Market Overview: LME trading volume fell to 12,053 lots, while open interest grew by 2,388 lots to reach 223,000 lots. LME zinc experienced four bearish candles overnight, with various moving averages creating resistance. Zinc inventory rose significantly by 18,050 tons to 247,825 tons, marking a 7.86% increase. This shift from decline to increase occurred as funds entered the market at lower levels, leading to a global stock market rebound and easing market sentiment. Despite this, recession concerns continued to weaken LME zinc.
• SHFE Zinc Market Update: SHFE trading volume dropped to 83,764 lots, and open interest fell by 128 lots to 82,705 lots. Overnight, SHFE zinc displayed a bullish candle with the lower Bollinger Bands offering support. Market sentiment improved slightly, and other non-ferrous metals began stabilizing. Zinc supply support remained steady, suggesting that significant further declines in zinc prices are unlikely in the near term.
• MCX Zinc Price Movement: Zinc prices on the MCX edged down by 0.12% to ₹247.45, pressured by global economic concerns. U.S. job growth slowed more than expected in July, with unemployment rising to 4.3%, raising recession fears. This economic data, coupled with weak Chinese manufacturing, led to a global selloff in risk assets. However, expectations of deeper interest rate cuts by the U.S. Federal Reserve starting in September might boost industrial activity and metals demand.
• China's Zinc Production and Supply: China’s refined zinc production in June increased to 545,800 tons, up 1.81% month-on-month but down 1.2% year-on-year. For the first half of the year, output totaled 3.182 million tons, slightly exceeding expectations. Despite higher production in some regions, zinc concentrate supply remains tight. China’s MMG Ltd halted operations at its Dugald River zinc mine in Australia for repairs, worsening the tight market. The global zinc surplus fell to 8,300 tons in May from 15,300 tons in April, with a year-to-date surplus of 193,000 tons compared to 330,000 tons last year.

News

• Zinc futures slip below support and turn bearish. Zinc futures on the MCX made a daily close below the support at ₹250 on Monday. As they have been falling over the past three weeks, the breach of support could add further downward pressure on the contract. The Zinc August expiry futures are likely to drop to ₹230/kg.
• Vedanta hopeful to complete the demerger process by fiscal year-end. The company's existing businesses will be structured into six independent companies after the demerger: Vedanta Aluminium, Vedanta Oil & Gas, Vedanta Power, Vedanta Steel and Ferrous Materials, Vedanta Base Metals, and Vedanta Ltd.
• Vedanta says it will continue to cut costs to boost margins as Q1 profit soars. During the April-June quarter (Q1), cost reduction helped the company achieve a 54% year-on-year growth in its consolidated net profit to ₹5,095 crore. The consolidated revenue grew 6% during this period to ₹35,239 crore.

Expert Opinion

• The market experienced fresh selling, with a 1.47% increase in open interest to 1,999 as prices declined by ₹0.30 for zinc. Zinc finds support at ₹245.50, with further support at ₹243.40. Resistance is likely at ₹248.80, with a potential testing of ₹250 on the upside.