Zinc Market Update: Bearish Momentum and Supply Challenges Impact Prices

Key Industry Insights

• Price Decline: Zinc prices saw significant drops across major exchanges, with LME closing down 2.83%, SHFE down 0.68%, and MCX falling by 1.77%.
• Supply and Demand: LME zinc inventories are relatively high, but with cancelled warrants rising. However, zinc production is expected to dip below 500,000 mt in November. The global zinc deficit increased in August but remains in surplus year-to-date.
• Market Sentiment: The strengthening U.S. dollar and lack of market support have contributed to weak market sentiment. China's economic stimulus measures have failed to inspire confidence, with regional zinc inventories showing mixed results. Global Developments: China’s zinc production rose slightly in September, but still showed a year-on-year decline. Other market developments include the Taliban's announcement of major mining contracts, and Korea Zinc’s $1.8 billion share sale being suspended.
• Price Forecast: The zinc market faces resistance at Rs 283.7 and support at Rs 277.6. A potential break below the support level could test Rs 275.3.

Zinc Prices

• LME: As of yesterday, LME zinc opened at $3,063/mt, reaching a high of $3,071/mt, and low of $2,970/mt and finally closed down at $2,984/mt, a drop of $87/mt or 2.83%. Today, LME Zinc trading commenced at 2,992.5/mt.
• SHFE: As of yesterday, the most-traded SHFE zinc 2412 contract opened at 24,820 yuan/mt, hitting a high of 25,055 yuan/mt and a low of 24,810 yuan/mt, finally closing down at 24,855 yuan/mt, a drop of 170 yuan/mt or 0.68%. Today, SHFE Zinc trading commenced at 24,880 yuan/mt.
• MCX: As of yesterday, MCX Zinc prices opened at Rs 284/kg, reached the highest level of Rs 285.25, lowest level at Rs 279.10/kg and finally closed down at Rs 279.90/kg, a decrease of 5.05 or 1.77%. Today, MCX Zinc trading commenced at Rs 280.95/kg.

Zinc Supply & Demand

• LME Opening Stock - 245225 | Live Warrants - 233700 | Cancelled Warrants - 11525
• LME: Zinc trading volume dropped to 12,422 lots, though open interest rose slightly to 243,000 lots. LME zinc showed bearish momentum with resistance at the 10-day moving average, impacted by the strengthening U.S. dollar and lack of supportive policies, leaving market sentiment weak.
• SHFE: Trading volume decreased to 73,281 lots, and open interest decreased by 2,060 lots to 99,582 lots. November zinc ingot production is expected to dip below 500,000 mt, as supply-demand conditions stay weak and macroeconomic concerns weigh on SHFE zinc.
• MCX: Zinc prices fell by 1.77% to 279.9 as China’s $1.4 trillion debt restructuring package aimed at easing financial stress underwhelmed investors due to its limited new spending. Regionally, zinc inventories were mixed, with Shanghai stocks down due to low arrivals and increased buying at reduced prices, while Guangdong saw a rise in inventory.
• Globally, the zinc deficit increased to 66,300 mt in August from 51,000 mt in July, though a surplus of 127,000 mt remains from January to August 2024. China’s September refined zinc production rose over 2% month-on-month but fell over 8% year-on-year, as output resumed in key regions post-maintenance.

Zinc News

• US dollar index rises again, SHFE zinc focus declines.
• MCX zinc prices dip amid market's mixed outlook on China's new stimulus impact.
• The Taliban announced $6 billion in contracts for 21 major mines in Afghanistan, including zinc, iron, and gold.
• Korea Zinc's $1.8 billion share sale was suspended due to a revision order by South Korea's financial regulator.
• The Indian government raised Rs 3,449 crore by selling a 1.6% stake in Hindustan Zinc as part of its disinvestment drive.

Expert Opinion

• Zinc is under fresh selling pressure with a 10.22% increase in open interest to 3,137 contracts as prices fell by Rs 5.05. Zinc finds support at 277.6, with a break below this potentially testing 275.3. Resistance is anticipated at 283.7, and a move above could target 287.5.