Zinc Prices Fall as Market Faces Weak Demand and Rising Production

Key Takeaways

• LME Zinc Declines: LME zinc prices dropped by 1.03% to $2,970/mt amid market volatility and a stronger US dollar.
• SHFE and MCX Zinc Prices Fall: Both SHFE and MCX zinc prices recorded declines due to weak demand in key markets and poor economic sentiment.
• Rising Zinc Production: Domestic zinc smelter output is on the rise, with production set to increase in December, potentially contributing to a supply glut.
• Global Zinc Deficit: The zinc market posted a deficit of 69,100 mt in October, a significant increase from the previous month, yet still showing a cumulative surplus for 2024.
• Expert Outlook: Zinc is expected to face resistance at Rs 280.8, with immediate support at Rs 277.7, indicating potential for further price drops.

Zinc Prices

• LME: As of yesterday, LME zinc opened at $2,980/mt, reaching a high of $3,001.5/mt and a low of $2,952.5/mt, and closing down at $2,970/mt, a decrease of $31/mt or 1.03%. Today, LME Zinc trading commenced at $2,974/mt.
• SHFE: As of yesterday, the most-traded SHFE zinc 2502 contract opened at 24,935 yuan/mt, reached a high of 25,040 yuan/mt and a low of 24,890 yuan/mt, eventually closing down at 24,895 yuan/mt, a decrease of 15 yuan/mt or 0.06%. Today, SHFE Zinc trading commenced at 24,960 yuan/mt.
• MCX: As of yesterday, MCX Zinc prices opened at Rs 280.10/kg, reached the highest level of Rs 281.50, the lowest level at Rs 278.40/kg and finally closed down at Rs 278.80/kg, a decrease of 3.30 or 1.17%. Today, MCX Zinc trading commenced at Rs 280.65/kg.

Zinc Supply & Demand:

• LME Opening Stock - 257525 | Live Warrants - 171850 | Cancelled Warrants - 85675
• LME: Trading volume rose to 11,716 lots; open interest increased by 1,500 to 231,000 lots. Zinc recorded a 4-day losing streak, with a downward shift in price. Inventory fell by 2,875 mt (1.1%) to 257,525 mt. US jobless claims decline pushed the US dollar to a 2-year high, affecting base metals prices.
• SHFE: Trading volume decreased to 42,637 lots; open interest increased by 1,222 to 125,000 lots. Zinc faced a 5-day losing streak, with the 40-day moving average forming resistance. Poor macro sentiment and a decline in social inventory pressured zinc prices.
• MCX: Zinc prices fell 1.17% to Rs 278.8, weighed down by weak demand in China. November retail sales growth and falling home prices highlighted economic challenges. Beijing's stimulus measures lacked clarity, failing to boost optimism.
• Zinc inventories on the Shanghai Futures Exchange fell by 4.4%, but domestic smelter output rose, with production set to increase in December.
• Global zinc deficit widened to 69,100 mt in October, but a cumulative surplus of 19,000 mt was reported for 2024, down from 356,000 mt last year due to reduced mine production.

Zinc News

• US dollar rises to two-year high, LME zinc records four-day losing streak.
• MCX zinc prices decline amid demand concerns and increased production.
• The price of zinc futures has been moderating over the past week. The December expiry contract, after facing a resistance at Rs 293, started to decline. The December futures can rebound from Rs 270-276 price band.

Expert Opinion

In experts’ opinion, the market experienced long liquidation, with open interest dropping 17.53% to 1,543 contracts as prices slipped Rs 3.3. Zinc has immediate support at Rs 277.7, with further downside potential to Rs 276.5. Resistance is seen at Rs 280.8, and a breakout could push prices to Rs 282.7.