Zinc Prices Dip Amid Rising Inventories and US Fed’s Hawkish Stance

Key Takeaways

• Price Trends: LME Zinc closed at $3,001/mt, down 1.17%. SHFE Zinc dropped to 25,000 yuan/mt, down 0.62%. MCX Zinc fell to Rs 282.1/kg, down 0.68%.
• Supply & Demand Dynamics: LME inventories decreased by 1,700 mt (-0.65%) to 260,400 mt. SHFE inventories dropped 4.4% last week. October's global zinc deficit expanded to 69,100 mt.
• Market Challenges: Weak Chinese demand and subdued investor confidence due to unclear stimulus measures. US Fed's hawkish stance strengthened the dollar, exerting downward pressure.
• Future Outlook: Zinc prices face support at Rs 280.6, with resistance at Rs 283.6. A breakout could test Rs 284.9.

Zinc Prices

• LME: As of yesterday, LME zinc opened at $3,033/mt, reaching a low of $2,988/mt, and finally closed down at $3,001/mt, a decrease of $35.5/mt or 1.17%. Today, LME Zinc trading commenced at $2,976/mt.
• SHFE: As of yesterday, the most-traded SHFE zinc 2502 contract opened at 25,050 yuan/mt, reached a high of 25,085 yuan/mt and a low of 24,970 yuan/mt, eventually closed down at 25,000 yuan/mt, a decrease of 155 yuan/mt or 0.62%. Today, SHFE Zinc trading commenced at 24,935 yuan/mt.
• MCX: As of yesterday, MCX Zinc prices opened at Rs 283.25/kg, reached the highest level of Rs 283.25, the lowest level at Rs 280.20/kg and finally closed down at Rs 282.10/kg, a decrease of 1.35 or 0.68%. Today, MCX Zinc trading commenced at Rs 280.10/kg.

Zinc Supply & Demand

• LME Opening Stock - 260400 | Live Warrants - 172050 | Cancelled Warrants - 88350
• LME: Trading volume declined to 8,619 lots, with open interest dropping by 4,398 lots to 230,000 lots. LME zinc extended its losing streak for a third day, facing resistance from moving averages. Inventories fell by 1,700 mt to 260,400 mt (-0.65%). Hawkish US Fed remarks and a strong dollar pressured prices.
• SHFE: Trading volume decreased to 37,986 lots, while open interest rose by 961 lots to 124,000 lots. SHFE zinc marked a four-day losing streak, though tight spot market conditions limited the decline. Supply-side support weakened, and prices fluctuated downward.
• MCX: Zinc prices dropped 0.48% to Rs 282.1 amid continued demand uncertainty in China. Slower-than-expected November retail sales growth and a prolonged property sector slump added to bearish sentiment, while Beijing's vague stimulus measures failed to boost investor confidence.
• On the supply side, Shanghai zinc inventories fell 4.4% last week. However, December refined zinc production is projected to rise by 20,000 mt (+5% MoM), driven by increased output in Inner Mongolia, Qinghai, and Hunan. Despite this, cumulative 2024 production declined 6% YoY.
• Globally, zinc market recorded a 69,100 mt deficit in October, up from 47,000 mt in September, per ILZSG data. The first ten months of 2024 saw a 19,000 mt surplus, down sharply from 356,000 mt last year, as mine production declined 3.8% YoY.

Zinc News

• US Fed's Unexpected Hawkish Remarks; LME Zinc Records Three-Day Losing Streak. The US Fed cut interest rates by 25 basis points as expected, but halved the anticipated number of rate cuts for next year. The US Q3 current account recorded the largest deficit on record.
• MCX Zinc Declines Amid Weak Chinese Demand and Rising Production
• MBK Partners and Young Poong Expand Stake in Korea Zinc to 46.7% of Voting Shares.
• Hindustan Zinc to transition to renewables for 70% of total power requirements.

Expert Opinion

In experts’ opinion, Zinc witnessed long liquidation, with open interest dropping by 14.21% to 1,871 contracts, while prices fell Rs 1.35. Support is now at Rs 280.6, with further downside to Rs 278.9. Resistance is pegged at Rs 283.6, and a breakout could test Rs 284.9.