Zinc Prices Rise Amid Higher Energy Costs

Price

• LME: As of yesterday, LME zinc opened at $2,645.50/mt, reached a high of $2,776.50/mt, and eventually closed at $2,740.50/mt, up $97.50/mt, or 3.69%. Today, LME zinc trading commenced at $2,738/mt.
• SHFE: As of yesterday, the most-traded SHFE 2409 zinc contract opened at 22,845 yuan/mt, reached a high of 22,960 yuan/mt, and finally closed at 22,890 yuan/mt, up 285 yuan/mt, or 1.26%. Today, SHFE zinc trading commenced at 22,890 yuan/mt.
• MCX: As of yesterday, zinc prices opened at ₹253.50/kg, reached a high of ₹258.75/kg, a low of ₹253.05/kg, and finally closed at ₹257.70/kg, a rise of ₹6.30 or 2.51%. Today, MCX zinc trading commenced at ₹257.45/kg.

Demand and Supply

• LME Opening Stock - 239,925 | Live Warrants - 215,125 | Cancelled Warrants - 24,800 -LME: Trading volume increased to 15,014 lots, and open interest increased by 1,317 lots to 223,000 lots. Last Friday, LME zinc recorded a large bullish candlestick, with LME inventory decreasing by 2,100 mt to 239,925 mt, a drop of 0.87%. Better-than-expected US employment data boosted the market, and macro sentiment was bullish, leading to a rebound in LME zinc. It is expected that LME zinc will fluctuate today.
• SHFE: Trading volume decreased to 100,000 lots, and open interest decreased by 815 lots to 74,441 lots. Last Friday, SHFE zinc recorded a bullish candlestick, with macro sentiment being bullish, and domestic inventory continued to decrease, strengthening positive sentiment. It is expected that SHFE zinc will fluctuate and consolidate today.
• Zinc prices on the MCX rose 2.51% to ₹257.70, driven by anticipated higher energy costs, which make up about 50% of production expenses. Zinc inventories in Shanghai Futures Exchange warehouses fell 8.5% from the previous Friday. Inflation data showing China’s retreat from deflation boosted market sentiment. However, U.S. job growth slowed more than expected in July, with the unemployment rate rising to 4.3%, contributing to an initial global selloff in risk assets amid weak Chinese manufacturing.
• However, the data also fueled expectations for deeper interest rate cuts by the U.S. Federal Reserve, which provided some support to the metals market. In China, refined zinc production in June reached 545,800 metric tons, up 1.81% month-on-month but down 1.2% year-on-year. The tight supply of zinc concentrate and ongoing consumption of refinery raw material inventories have kept the market balanced. Additionally, the halt of operations at MMG Ltd's Dugald River zinc mine in Australia for repair work is expected to exacerbate the already tight zinc concentrate market, potentially creating further shortages.

News

• Zinc gains as buying was triggered by expectations of higher energy costs.
• Hindustan Zinc (HZL) is expected to declare a special dividend amounting to ₹6,000 crore this month, The Economic Times reported, citing industry sources.
• China's CPI in July rose 0.5% YoY and 0.5% MoM.

Expert's Opinion

• In opinion, the zinc market experienced fresh buying, with a 3.41% increase in open interest to settle at 2,212 contracts. Zinc is currently supported at 254.3, with a potential test of 250.8 on the downside. On the upside, resistance is likely at 260, and a move above this level could push prices towards 262.2.