Zinc Market: Mixed Signals Amid Rising Production and Tightening Inventories

Key Takeaways

• Price Trends: LME Zinc closed at $3,040/mt, up 0.62%. SHFE: closed at 25,300 yuan/mt, up 0.5%. MCX declined slightly to Rs 282.85/kg, down 0.12%.
• Production Trends: Refined zinc production rose marginally in November but remains down 12% YoY. December production expected to rise 5% MoM in China.
• Market Outlook: LME zinc expected to trade in a range due to stronger USD and mixed fundamentals. SHFE faces resistance at the 20-day moving average, with range-bound expectations.
• Global Market Dynamics: Weaker macro sentiment and slower mine production in Canada, China, South Africa, and Peru.

Zinc Prices

• LME: As of last Friday, LME zinc opened at $3,054/mt, reaching a high of $3,055/mt and a low of $3,008/mt, eventually closed higher at $3,040/mt, up $6/mt or 0.62%.
• Today, LME Zinc trading commenced at $3,034.5/mt.
• SHFE: As of last Friday, the most-traded SHFE zinc 2502 contract opened at 25,170 yuan/mt, reached a high of 25,310 yuan/mt and a low of 25,230 yuan/mt, closing at 25,300 yuan/mt, up 125 yuan/mt or 0.5%. Today, SHFE Zinc trading commenced at 25,360 yuan/mt.
• MCX: As of last Friday, MCX Zinc prices opened at Rs 282.95/kg, reached the highest level of Rs 284.25, lowest level at Rs 281.25/kg and finally closed down at Rs 282.85/kg, a decrease of 0.35 or 0.12%. Today, MCX Zinc trading commenced at Rs 281.50/kg.

Zinc Supply & Demand

• LME Opening Stock - 244500 | Live Warrants - 170175 | Cancelled Warrants - 74325
• LME: Trading volume rose to 5,979 lots, while open interest fell by 1,584 lots to 225,000. Zinc posted a small bearish candlestick with a long lower shadow. Inventory dropped by 1.79% to 244,500 mt. A stronger US dollar and weaker expectations for Fed rate cuts pressured base metals, with LME zinc likely to trade in a range today.
• SHFE: Trading volume fell to 60,598 lots, and open interest decreased by 737 lots to 143,000. Zinc showed a small bullish candlestick, facing resistance at the 20-day moving average. Mixed positioning and bearish macro sentiment contrast with supportive fundamentals. SHFE zinc is expected to remain range-bound.
• MCX: Zinc settled slightly lower at Rs 282.85, down 0.12%. Domestic refined zinc production for December is projected to rise by 5% month-on-month but remains over 6% lower year-on-year for 2024. Global mine production dropped 3.8% in January-October, with declines in Canada, China, South Africa, and Peru.
• Refined zinc production rose marginally in November but is down nearly 12% year-on-year. Production for the first 11 months fell 6% due to lower output in Henan, Gansu, and Sichuan. While retail sales and home prices weakened in November, hopes of Beijing's fiscal stimulus supported the market. Shanghai Futures Exchange inventories declined by 24.67%, reflecting tighter supply.

Zinc News

• Korea Zinc, MBK Partners clash over cumulative voting. Cumulative voting allows shareholders to allocate their votes in proportion to the number of directors being elected, concentrating them on a single candidate if desired. This system is often viewed as a way to protect minority shareholders by increasing the likelihood of electing directors they support.
• MCX Zinc dropped as China’s refined zinc production in December is expected to increase by over 5% M-o-M.

Expert Opinion

In experts’ opinion, Zinc is under fresh selling pressure, with a rise in open interest by 0.64% to settle at 2999, while prices declined by Rs 0.35. Support levels are at Rs 281.4, with potential testing at Rs 279.8. Resistance is seen at Rs 284.4, and a move above could push prices towards Rs 285.8.