Zinc Market Update: Prices Show Mixed Trends Amid Supply Deficit

Key Takeaways

• Mixed Price Movements: Zinc prices are fluctuating across major exchanges, influenced by global supply constraints and shifting demand forecasts.
• LME Price Increase: The LME zinc price closed slightly higher, while SHFE and MCX prices declined.
• Projected Supply Deficit: The International Lead and Zinc Study Group (ILZSG) anticipates a significant supply deficit for zinc in 2024, primarily due to reduced production in Europe and China.
• Demand Forecasts: While demand growth in China is projected to be low, global refined zinc demand is expected to rise by 1.8% in 2024.

Current Zinc Prices

• LME: As of yesterday, LME zinc opened at $3,051/ton, hitting a high of $3,105/ton, and low of $3,039.5/ton, closing up at $3,062/ton, an increase of $10/ton or 0.33%. Today, LME Zinc trading commenced at 3,065.5/ton.
• SHFE: As of yesterday, the most-traded SHFE zinc 2411 contract opened at 25,330 yuan/ton, hitting a high of 25,430 yuan/ton, low of 24,990 yuan/ton and finally closed down at 25,110 yuan/ton, a decrease of 190 yuan/ton or 0.75%. Today, SHFE Zinc trading commenced at 25,040 yuan/ton.
• MCX: As of yesterday, MCX Zinc prices opened at Rs 282.05/kg, reached the highest level of Rs 286.20/kg, lowest level at Rs 280.45/kg and finally closed down at Rs 281.95/kg, a decrease of 0.35 or 0.12%. Today, MCX Zinc trading commenced at Rs 280.50/kg.

Zinc Supply & Demand Dynamics

• LME Opening Stock - 240525 | Live Warrants - 206850 | Cancelled Warrants - 33675
• LME: Trading volume decreased to 11,456 lots, and open interest decreased by 5,782 lots to 254,000 lots. Overnight, LME zinc recorded a bullish candlestick, with support from the lower Bollinger Band. LME zinc inventory increased by 1,225 ton to 240,525 ton, an increase of 0.51%.
• SHFE: Trading volume decreased to 77,338 lots, and open interest decreased by 3,538 lots to 107,000 lots. Overnight, SHFE zinc recorded a bearish candlestick, with support from the 20-day moving average below. The fundamental supply weakness continued to provide support. Additionally, the State Council Information Office held a press conference on real estate today, and the market is waiting for more macro guidance, keeping SHFE zinc at high levels.
• MCX: Zinc prices edged up by 0.12% to settle at Rs 281.95 as the global zinc market faces a significant supply deficit in 2024. The International Lead and Zinc Study Group (ILZSG) has revised its outlook, shifting from a previously expected surplus of 56,000 tons to a deficit of 164,000 tons. This supply shortage is driven by reduced output, particularly in Europe, where production is forecast to drop by 11.4%, mainly due to declines in Ireland and Portugal. Additionally, production cuts are expected in China, Canada, South Africa, the U.S., and Peru, further tightening the market. Meanwhile, zinc demand in China is forecast to rise by only 0.7% in 2024, reflecting the metal's exposure to the struggling property sector.
• Despite this, global refined zinc demand is expected to increase by 1.8% next year, reaching 13.83 million tons. ILZSG anticipates global zinc production will decline by 1.8% in 2024 to 13.67 million tons due to limited availability of concentrates. Market participants also noted a decline in Chinese refined zinc production, which fell by 0.68% month-on-month and 7.64% year-on-year in August. Heavy rains, power rationing, and raw material procurement difficulties contributed to the production drop, while some smelters resumed operations after maintenance, partially offsetting these declines.

Global Zinc News: Key Highlights

• The US dollar index remained high, and ongoing geopolitical conflicts led to some market risk aversion sentiment. Coupled with market expectations for China's real estate sector, LME zinc's focus slightly rebounded.
• Supply Weakness Continues to Support SHFE Zinc at High Levels.
• MCX Zinc Prices Gains yesterday As Zinc Facing Supply Deficit As Mine Output Falls Again.
• Peru’s Chinalco, a unit of Aluminum Corp. of China, is preparing additional investments for the recent expansion of its Toromocho copper mine in Junín region.
• MBK Partners issued a strong warning to Korea Zinc and its Chairman Choi Yoon-beom on Oct. 17, in response to allegations of stock price manipulation.

Expert Opinion

• The zinc market is witnessing short covering, with open interest decreasing by 1.98% to 2,233 contracts as prices rose slightly by Rs 0.35. Zinc is currently supported at Rs 279.6, with a potential test of Rs 277.1 if prices decline.
• On the upside, resistance is expected at Rs 285.4, and a break above this level could push prices to Rs 288.7.