Zinc Prices Edge Higher Amid Supply Constraints and Rate Cut Hopes

Price

• LME: As of yesterday, LME zinc opened at $2,797/mt, reached a high of $2,834/mt, and finally closed up at $2,794.5/mt, an increase of $4/mt or 0.14%. Today, LME zinc trading commenced at $2,797/mt.
• SHFE: As of yesterday, the most-traded SHFE 2410 zinc contract opened at 23,445 yuan/mt, reached a high of 23,495 yuan/mt, a low of 23,210 yuan/mt, and finally closed at 23,280 yuan/mt, an increase of 10 yuan/mt or 0.04%. Today, SHFE zinc trading commenced at 23,520 yuan/mt.
• MCX: As of yesterday, zinc prices opened at ₹263.8/kg, reached a high of ₹267.35/kg, a low of ₹261.75/kg, and finally closed at ₹264.60/kg, a rise of ₹0.60 or 0.23%. Today, MCX zinc trading commenced at ₹265.10/kg.

Demand and Supply

• LME: Opening Stock: 258,800 tons
• Live Warrants: 228,500 tons
• Cancelled Warrants: 30,300 tons
• Trading volume increased to 10,097 lots, while open interest decreased by 1,881 lots to 215,000 lots. LME zinc formed a bearish candlestick, facing resistance from the 40-day moving average. Inventory decreased by 1,200 tons to 258,800 tons, a decline of 0.46%. Market expectations for a US Fed rate cut in September increased, weakening the US dollar and stabilizing LME zinc.
• SHFE: Trading volume increased to 77,648 lots, and open interest rose by 2,635 lots to 99,262 lots. SHFE zinc recorded a bearish candlestick, supported by the 5-day moving average. Despite opening higher due to overseas markets, weak domestic demand continues to drag down zinc prices, with SHFE zinc seeing slight gains.
• MCX: Zinc prices rose by 0.23%, settling at ₹264.6, driven by improving demand in China and a weakening dollar. Shanghai zinc inventories dropped by 9.3%, tightening supply and supporting prices. Expectations of higher energy costs, which constitute about 50% of zinc production, further bolstered prices. China's move away from deflation also contributed positively to equities and commodities markets.
• U.S. and Global Zinc Market: U.S. job growth slowed in July, with unemployment rising to 4.3%, raising concerns about an economic slowdown. Weak Chinese manufacturing data initially triggered a selloff but increased expectations of deeper Fed rate cuts. MMG Ltd. halted operations at the Dugald River zinc mine, with the shutdown expected to last two months. The global zinc surplus decreased to 8,300 tons in May from 15,300 tons in April. China's July zinc production fell 10.3% month-on-month and 11.15% year-on-year.

News

• Zinc rises on stronger demand in China and a weaker dollar. Zinc futures on the Multi Commodity Exchange (MCX) found support at ₹245 and began to rally a couple of weeks ago. Last week, it surpassed the resistance at ₹255. The August futures closed at ₹264 on Monday, with the August expiry remaining bullish.

Expert's Opinion

• The market is experiencing short covering, with open interest dropping by 9.03% to settle at 1,481 contracts. Zinc is currently supported at ₹261.9, with potential testing of ₹259 if this support is breached.
• On the upside, resistance is anticipated at ₹267.5, with a move above potentially testing ₹270.2.