Zinc Prices Dip as Market Sentiment Weakens and Global Deficit Looms

Zinc Prices

• LME: As of yesterday, LME zinc opened at $3,173/ton, hitting a high of $3,190.5/ton, and a low of $3,066.5/ton. It eventually closed down at $3,076.5/ton, a decrease of $103.5/ton, or 3.25%. Today, LME Zinc trading commenced at $3,081/ton.
• SHFE: As of yesterday, the most-traded SHFE zinc 2411 contract opened at 25,360 yuan/ton, hitting a high of 25,365 yuan/ton, and a low of 25,045 yuan/ton. It eventually closed down at 25,160 yuan/ton, a decrease of 125 yuan/ton, or 0.49%. Today, SHFE Zinc trading commenced at 25,040 yuan/ton.
• MCX: As of yesterday, MCX Zinc prices opened at Rs 285.10/kg, reached the highest level of Rs 285.45/kg, the lowest level at Rs 280.20/kg and finally closed down at Rs 280.55/kg, a decrease of 7.65 or 2.65%. Today, MCX Zinc trading commenced at Rs 280/kg.

Zinc Supply & Demand

• LME Opening Stock - 242400 | Live Warrants - 216625 | Cancelled Warrants - 25775
• LME: Trading volume increased to 15,828 lots, and open interest rose by 1,147 lots to 261,000 lots. Overnight, LME zinc recorded a large bearish candlestick, with LME inventory decreasing by 1,700 ton to 242,400 ton, a drop of 0.7%. Macro sentiment has weakened, with expectations for further US interest rate cuts diminishing, combined with the fading of positive domestic policy sentiment, impacting LME zinc. It is expected to fluctuate today.
• SHFE: Trading volume decreased to 75,422 lots, and open interest increased by 806 lots to 117,000 lots. Overnight, SHFE zinc recorded a bearish candlestick, with the optimism from domestic policy support somewhat fading, combined with the accumulation of zinc social inventory. Actual downstream consumption still exerted pressure on SHFE zinc's trend, causing its focus to shift downward. SHFE zinc is expected to fluctuate today.
• MCX: Zinc prices fell by 2.65%, settling at 280.55, as markets were disappointed by the lack of additional stimulus measures from the National Development and Reform Commission (NDRC) in China. Despite this, Chinese authorities announced plans to expedite special-purpose bond issuances to support economic growth. Meanwhile, China has already implemented comprehensive economic support measures, such as reducing banks' reserve requirements and key lending rates, though markets are awaiting further fiscal signals. Zinc prices were also pressured by growing expectations of a less aggressive easing campaign by the Federal Reserve, following a stronger-than-expected U.S. jobs report for September.
• On the supply side, global zinc markets are expected to face a deficit of 164,000 tons in 2024, according to the International Lead and Zinc Study Group (ILZSG), primarily due to reduced output in Europe and other regions. European production is forecast to fall by 11.4%, driven by cuts in Ireland and Portugal, with additional declines in China, Canada, South Africa, the U.S., and Peru. However, increases in output from Australia, Mexico, and Congo could offset these declines. In China, refined zinc production fell to 486,300 metric tons in August, a 0.68% month-over-month and a 7.64% year-over-year decline, impacted by factors like heavy rains and power rationing.

Zinc News

• Zinc prices declined after China’s National Development and Reform Commission (NDRC) announced that no further stimulus measures would be introduced.
• Russian mining company Nordgold will invest over 30 billion rubles (US$321 million) in the development of Sardana zinc deposit, one of the largest zinc fields in Russia in terms of reserves.

Expert Opinion

• The zinc market is experiencing long liquidation, as open interest dropped by 16.89% to 3,080 contracts while prices fell by Rs 7.65. Immediate support is at 278.8, with a potential test of 276.9 if breached. Resistance is expected at 284, and a move above this level could push prices towards 287.3.