Zinc Prices Drop Amid Market Uncertainty and Low Demand

Key Insights

• Price Drop: Zinc prices across LME, SHFE, and MCX markets fell, with LME closing at $2,823.5/mt and MCX at Rs. 269/kg.
• Weakened Demand: Zinc prices are under pressure due to reduced demand, particularly during China’s New Year holiday and uncertain macro conditions.
• Inventory Levels: Zinc stock at LME decreased by 2,700 mt, which may support price stabilization despite bearish market trends.
• Global Deficit: Zinc market deficit narrowed in November, but 2024 still shows a deficit, indicating a potential tight supply outlook.
• Expert Opinion: Support levels for MCX zinc are at Rs. 266.9 and Rs. 264.7, while resistance may appear around Rs. 272.6.

Zinc Prices

• LME: As of last Friday, LME zinc opened at $2,850/mt, reaching a high of $2,895/mt and a low of $2,822.5/mt, and closing down at $2,823.5/mt, a decrease of $21/mt or 0.74%. Today, LME Zinc trading commenced at $2,825/mt.
• SHFE: As of last Friday, the most-traded SHFE zinc 2503 contract opened at 23,900 yuan/mt, hitting a low of 23,530 yuan/mt, and closing down at 23,530 yuan/mt, a decrease of 345 yuan/mt or 1.45%. Today, SHFE Zinc trading commenced at 23,655 yuan/mt.
• MCX: As of last Friday, MCX Zinc prices opened at Rs 272.50/kg, reached the highest level of Rs 273.90, lowest level at Rs 268.25/kg and finally closed down at Rs 269/kg, a decrease of 1.75 or 0.65%. Today, MCX Zinc trading commenced at Rs 269.80/kg.

Zinc Supply & Demand

• LME Opening Stock - 188425 | Live Warrants - 141800 | Cancelled Warrants - 46625
• LME: Trading volume dropped to 73,040 lots, while open interest rose by 1,642 lots to 219,000 lots. LME zinc showed a bearish candlestick with resistance at the 20-day and 60-day moving averages, and support at the lower Bollinger Band. Zinc inventory decreased by 2,700 mt to 188,425 mt. Zinc is expected to fluctuate in the short term, awaiting macro data.
• SHFE: Trading volume fell to 60,670 lots, with open interest increasing by 4,344 lots to 98,450 lots. SHFE zinc formed a bearish candlestick, with resistance at the 10-day and 20-day moving averages. Zinc prices are under pressure due to weakened demand during the Chinese New Year and are expected to fluctuate downward.
• MCX: Zinc prices dropped 0.65% to Rs 269 as investors awaited U.S. tariff and policy updates. The downside was limited by lower inventories in LME-registered warehouses. China's industrial output surged in December, bolstered by monetary stimulus.
• The global zinc market deficit narrowed to 52,900 mt in November from 65,400 mt in October. For 2024, the market recorded a 33,000-mt deficit, contrasting with a 312,000-mt surplus in 2023. China's refined zinc production rose by over 10,000 mt in December, with more expected in January despite temporary production cuts.

Zinc News

• MCX Zinc falls as investors await clarity on U.S. President Trump's tariff plans.

• Zinc prices have been declining over the last week. The Zinc Futures contract on the Multi Commodity Exchange (MCX) rose to a high of Rs 279.30 per kg last week and has declined sharply from there. It is currently trading at Rs 269 per kg. MCX Zinc Futures contract can fall to Rs 262-Rs 260 in the short term.

• The US Fed is expected to keep interest rates unchanged at the upcoming monetary policy meeting and deliver a neutral message for the March meeting. The market awaits more data and information on Trump's policies.

• Bank of Japan raised interest rates to the highest level in 17 years. The central bank conducted a 1-year MLF operation of 200 billion yuan. In the first month of the new real estate tax policy implementation, an additional tax reduction of 11.69 billion yuan was achieved.

Expert Opinion

In experts’ opinion, Zinc witnessed long liquidation, with open interest dropping by 26.18% to settle at 1,049 as prices fell Rs 1.75. Support is at Rs 266.9, with further support at Rs 264.7. Resistance is likely at Rs 272.6, and a breakout above this level could push prices toward Rs 276.1.