Zinc Prices Edge Higher Amid Supply Concerns and China’s Export Reforms

Key Takeaways

Global Zinc Deficit Tightens: A deficit of 66,300 mt in August reflects increased supply pressure, with the 2024 surplus narrowing significantly compared to 2023.
China's Policy Impact: Export tax rebate cancellations are driving supply concerns, impacting global zinc prices and trade dynamics.
Mixed Market Movements: LME and MCX zinc prices rose slightly, but SHFE saw a decline amid lower trading activity and policy-related uncertainties.
China Production Trends: China's refined zinc production rose marginally in September, with October output expected to grow modestly despite maintenance-related disruptions.
Short-Term Resistance Levels: Zinc prices face resistance at Rs 282.8 on MCX, with potential to rise further if breached, driven by supply-demand imbalances.

Zinc Prices

LME: As of last Friday, LME zinc opened at $2,939/mt, reaching a high of $3,029/mt, finally closing up at $2,953.5/mt, an increase of $20.5/mt or 0.7%. Today, LME Zinc trading commenced at 2,955/mt.

SHFE: As of last Friday, the most-traded SHFE zinc 2412 contract opened at 24,810 yuan/mt, hitting a low of 24,400 yuan/mt, finally closing down at 24,475 yuan/mt, a decrease of 205 yuan/mt or 0.83%. Today, SHFE Zinc trading commenced at 24,700 yuan/mt.

MCX: As of last Friday, MCX Zinc prices opened at Rs 278.15/kg, reached the highest level of Rs 285.30, the lowest level at Rs 276/kg and finally closed down at Rs 276.75/kg, an increase of 1.10 or 0.40%. Today, MCX Zinc trading commenced at Rs 278/kg.

Zinc Supply & Demand:

LME Opening Stock - 248450 | Live Warrants - 223400 | Cancelled Warrants - 25050

LME: Trading volume rose to 14,636 lots, but open interest dropped to 247,000. LME zinc faced resistance from moving averages, with inventories up 6,450 mt (+2.67%). Zinc prices fluctuated after China adjusted export tax rebates for aluminium and copper.

SHFE: Trading volume fell to 107,000 lots, with open interest at 97,498. SHFE zinc saw weak performance as export policy changes raised concerns over reduced exports and trade disputes.

MCX: Zinc prices rose 0.4% to Rs 276.75 amid supply concerns following China’s export rebate cancellation. Zinc stocks in SHFE warehouses surged 24,039 mt, while the global zinc deficit grew to 66,300 tons in August.

For the first eight months of 2024, the global surplus narrowed to 127,000 mt, significantly lower than 418,000 mt during the same period last year. China's zinc consumption in August fell by 3% year-on-year to 581,000 mt, while domestic refined zinc production in September increased by over 2% month-on-month but decreased by 8% year-on-year. Production gains were driven by smelters resuming operations after maintenance, especially in Sichuan, Gansu, and Inner Mongolia. October production is expected to see modest growth of less than 1% month-on-month, with expansions in Inner Mongolia, Shaanxi, and Hunan offset by reductions in Gansu due to routine maintenance.

Zinc News

(1) Korea Zinc, whose management is embroiled in a takeover battle for the world's top refined zinc producer, said on Monday a government panel had found its lithium-ion battery material technology was subject to export controls.

(2) MCX Zinc prices rise as China cancels export tax rebates, fuelling supply woes.

Expert Opinion

In experts’ opinion, zinc is experiencing short covering, with a 7.6% decline in open interest to 2,480 contracts, while prices increased by Rs 1.1. Zinc finds support at Rs 273.5, with a break below potentially testing Rs 270.1. On the upside, resistance is seen at Rs282.8, and a move above this level could push prices toward Rs288.7. The supply-demand imbalance and China's production trends remain key drivers for zinc prices.