Zinc Prices Decline as Market Faces Supply Deficits and Demand Concerns
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Zinc prices have declined across LME, SHFE, and MCX markets due to economic concerns and reduced demand. Supply deficits are anticipated in 2024, driven by lower production in Europe and China, while market sentiment remains cautious following the US Fed meeting.
Price
- LME: As of yesterday, LME zinc opened at $3,082.5/ton, hitting a high of $3,109.5/ton and a low of $2,977.5/ton. It eventually closed down at $3,032.5/ton, a decrease of $44/ton, or 1.43%. Today, LME Zinc trading commenced at $3,025/ton.
- SHFE: As of yesterday, the most-traded SHFE zinc 2411 contract opened at 24,900 yuan/ton, hitting a high of 24,935 yuan/ton and a low of 24,650 yuan/ton. It finally closed down at 24,865 yuan/ton, a decrease of 175 yuan/ton, or 0.7%. Today, SHFE Zinc trading commenced at 24,800 yuan/ton.
- MCX: As of yesterday, MCX Zinc prices opened at Rs 280/kg, reached the highest level of Rs 282.40/kg, the lowest level at Rs 274.70/kg, and finally closed down at Rs 276.45/kg, a decrease of Rs 4.10, or 1.46%. Today, MCX Zinc trading commenced at Rs 277.85/kg.
Supply & Demand
- LME Opening Stock - 244,025 | Live Warrants - 218,425 | Cancelled Warrants - 25,600
- LME: Trading volume fell to 14,258 lots, and open interest decreased by 283 lots to 261,000 lots. Overnight, LME zinc recorded a large bearish candlestick, with LME inventory increasing by 1,625 tons to 244,025 tons, an increase of 0.67%. After the Fed meeting, expectations for a US rate cut in November weakened significantly, strengthening the dollar and putting pressure on base metals, with LME zinc shifting downward. Attention is on the US CPI data tonight.
- SHFE: Trading volume decreased to 90,166 lots, and open interest decreased by 2,478 lots to 114,000 lots. Overnight, SHFE zinc recorded a bearish candlestick, with the 5-day moving average forming resistance above. Macro sentiment weakened, the ferrous metals market returned to a downward trend, and with the weakening of Fed rate cut expectations, base metals broadly declined, with SHFE zinc shifting downward. SHFE zinc is expected to fluctuate today.
- MCX: Zinc prices dropped by 1.46% to Rs 276.45 as China's latest stimulus efforts failed to alleviate concerns about its economic recovery. The National Development and Reform Commission (NDRC) announced a 200 billion yuan ($28.3 billion) advance budget spending plan for investment projects, but the market remained skeptical. Despite this, BMI raised its zinc price forecast for 2024 to $2,700, citing tighter market fundamentals. Zinc also faced pressure from growing expectations of a less aggressive easing by the U.S. Federal Reserve after a stronger-than-expected September jobs report. Zinc inventories in warehouses monitored by the Shanghai Futures Exchange (SHFE) dropped to 79,980 metric tons.
- Meanwhile, the global refined zinc market is now expected to face a 164,000 metric ton deficit in 2024 due to reduced output in Europe and other regions, as per the International Lead and Zinc Study Group (ILZSG). This marks a shift from the previously forecasted surplus. European output is projected to decline by 11.4% this year, with reductions also seen in China, Canada, and Peru. China’s refined zinc production fell 0.68% month-on-month and 7.64% year-on-year in August, impacted by heavy rains, power rationing, and raw material procurement challenges. Some smelters resumed operations after maintenance, offsetting part of the decline.
News
- US Dollar Strengthens, LME Zinc Under Pressure.
- MCX Zinc Falls as China's Stimulus Fails to Ease Concerns Over Economic Recovery.
- The US Fed meeting minutes showed a split on the rate cut path. Daly indicated there might be one or two more rate cuts this year.
- BMI (a unit of Fitch Solutions) on Wednesday revised up its zinc price forecast for 2024 to $2,700/ton as tighter market fundamentals propel prices higher. A decline in zinc concentrate production has weighed on refined output, resulting in a forecasted market deficit of 141 kt in 2024, contrasting sharply with the 196 kt surplus observed in 2023.
Expert Opinion
- In opinion, the zinc market is under long liquidation as open interest dropped by 19.58%, settling at 2,477 contracts. Zinc is now seeing support at Rs 272.9, and below that could test Rs 269.3. Resistance is likely at Rs 281.4, with a move above potentially testing Rs 286.3. Zinc futures may bounce off Rs 275.
Daily Market Report
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Zinc Prices Fall as Market Faces Weak Demand and Rising Production
Zinc prices experienced a decline across LME, SHFE, and MCX, driven by weak demand from China and macroeconomic challenges. The global zinc market is facing a widening deficit, but higher domestic smelter output and rising inventories have placed downward pressure. Experts indicate further downside potential in the near term.
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Zinc Prices Dip Amid Rising Inventories and US Fed’s Hawkish Stance
Zinc prices have continued their downward trend across global markets, impacted by weak demand in China, a strong US dollar, and rising supply pressures. LME and SHFE zinc inventories fell slightly, but projected increases in refined zinc production for December are adding to bearish sentiment.
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