Zinc Prices Maintain Fluctuating Trend Amid Tight Supply and Demand

Major Updates

• LME Zinc Trading Opens Higher: LME zinc trading commenced at $3,042.5/mt today, following a Boxing Day closure. The market remains volatile, with fluctuations expected due to various global factors.
• MCX Zinc Prices Show Moderate Gains: MCX zinc prices rose 0.43%, closing at Rs 283.2, driven by China's fiscal stimulus and tighter supply due to reduced SHFE inventories, although concerns over the property sector persist.
• China's Zinc Production Faces Decline: China's refined zinc output increased by 1,000 metric tons in November but saw a nearly 12% YoY decline. December output is expected to rise by 5% due to regional gains.

Zinc Price

• LME: As of yesterday, LME zinc was closed for Boxing Day. Today, LME Zinc trading commenced at $3,042.5/mt.
• SHFE: As of yesterday, the most-traded SHFE zinc 2502 contract opened at 25,425 yuan/mt, reached a high of 25,520 yuan/mt, and a low of 25,375 yuan/mt, eventually closing higher at 25,420 yuan/mt, up 25 yuan/mt or 0.10%. Today, SHFE Zinc trading commenced at 25,175 yuan/mt.
• MCX: As of yesterday, MCX Zinc prices opened at Rs 283.85/kg, reached the highest level of Rs 283.85, the lowest level at Rs 282.05/kg, and finally closed down at Rs 283.20/kg, an increase of Rs 1.20 or 0.43%. Today, MCX Zinc trading commenced at Rs 282.95/kg.

Zinc Demand and Supply

• LME Opening Stock: 248,950 | Live Warrants: 170,200 | Cancelled Warrants: 78,750
• SHFE Zinc Market: Trading volume on SHFE dropped to 48,625 lots, while open interest rose by 1,820 lots to 152,000. SHFE zinc formed a bearish candlestick, with the upper Bollinger Band acting as resistance. Despite increased imported zinc, tight domestic supply supports zinc prices.
• MCX Zinc Market: MCX zinc prices gained 0.43%, closing at Rs 283.2, driven by China's $411 billion bond issuance for economic growth. A 20.80% drop in SHFE zinc inventories suggests tightening supplies. However, challenges in China’s property sector and declining home prices continue to affect sentiment.
• China's Zinc Production: China's refined zinc output increased by 1,000 metric tons (0.3% MoM) in November but dropped nearly 12% YoY, with a cumulative 6% decline in 2024. Higher-than-expected production in regions like Qinghai and Inner Mongolia offset some provincial declines. December output is projected to rise 5%.
• Global Zinc Market: The global zinc market deficit grew to 69,100 metric tons in October, up from 47,000 in September. A 19,000 metric ton surplus was recorded in the first 10 months of 2024. Reduced mine output in Canada, China, South Africa, and Peru contributed to a 3.8% YoY decline.

Zinc News

• The number of initial jobless claims in the US last week was below expectations, yet the US dollar index remained near a two-year high. LME zinc is expected to maintain a fluctuating trend.
• MCX Zinc Rises on Hopes of Chinese Fiscal Stimulus.
• Base metals prices on the London Metal Exchange (LME) showed positive trends, with zinc increasing by 2.18% d-o-d. Meanwhile, inventories at LME-registered warehouses witnessed negative movements, with zinc stocks decreasing by 1.20% d-o-d.

Expert Opinion

In opinion, the market saw fresh buying interest as open interest increased by 0.71% to 2,980 contracts. Zinc is supported at Rs 282.2, with a potential test at Rs 281.2 if breached. Resistance is seen at Rs 284, and a move above this level could push prices to Rs 284.8.