Zinc Prices Rise on Reduced Supply and Strong Demand Outlook

Zinc Ingots

26 Aug 20242 Min ReadDaily Market Report

Zinc prices surged across global markets, driven by reduced supply due to production cuts and strong seasonal demand expectations. LME zinc hit a nearly six-week high, supported by a weaker US dollar. The bullish trend is reinforced by positive macro sentiment and ongoing supply constraints, with forecasts predicting further output reductions.

Price

LME: As of last Friday, LME zinc opened at $2,857.5/mt (lowest level), reached a high of $2,920/mt, and closed at $2,918/mt, up $60.5/mt or 2.12%. Today, LME zinc trading is closed.
SHFE: As of last Friday, the most-traded SHFE 2410 zinc contract opened at 24,010 yuan/mt, reached a high of 24,100 yuan/mt and a low of 23,870 yuan/mt, and finally closed at 24,075 yuan/mt, up 75 yuan/mt or 0.31%. Today, SHFE zinc trading commenced at 24,130 yuan/mt.
MCX: As of last Friday, zinc prices opened at ₹267.65/kg, reached a high of ₹268.45/kg and a low of ₹265.05/kg, and finally closed at ₹267.25/kg, a drop of ₹1.95 or 0.74%. Today, MCX zinc trading commenced at ₹268.55/kg.

Demand and Supply

LME Opening Stock - 256,050 | Live Warrants - 225,300 | Cancelled Warrants - 30,750
LME: Trading volume surged to 11,559 lots, while open interest grew by 3,785 lots, reaching 215,000 lots. LME zinc recorded a bullish candlestick, supported by various moving averages. Inventory declined by 800 mt to 256,050 mt, a 0.31% drop. A dovish speech by the US Fed last Friday led to a weaker US dollar, boosting non-ferrous metals, with LME zinc hitting a nearly six-week high.
SHFE: Trading volume fell to 115,000 lots, but open interest increased by 959 lots to 127,000 lots. SHFE zinc marked four consecutive bullish candlesticks, with the daily K-line trend rising. Positive macro sentiment, coupled with expectations of joint production cuts by zinc smelters, bolstered bullish sentiment, driving zinc prices higher.
MCX: Zinc prices rose by 1.43%, closing at ₹269.15, fueled by expectations of reduced supply and seasonal demand increase. The rally was triggered by 14 major Chinese zinc smelters agreeing to cut production due to falling treatment charges (TCs), which have pressured profits. Zinc concentrate treatment charges are at historically low levels, leading to production cuts in July and August.
Forecasts indicate that zinc output could drop by an additional 30,000 to 40,000 tons monthly from September to December, potentially reducing annual zinc ingot output by 3-4%. Open interest for the zinc contract on the Shanghai exchange has risen for three days, increasing by 12% to 126,000 lots. The global zinc market surplus narrowed to 8,700 metric tons in June from 44,000 tons in May, according to the ILZSG.

News

-US Fed's Dovish Speech Spurs Significant Rise in LME Zinc.

Zinc Rises on Reduced Supply Prospects and Seasonal Demand Uplift Expectations.
Indian equity markets opened higher on Monday, buoyed by Federal Reserve Chair Jerome Powell’s dovish comments at Jackson Hole and positive global cues.

Expert's Opinion

In the expert's opinion, the market is under fresh buying, with open interest surging by 38.5%. Zinc has immediate support at ₹267.4, with further support at ₹265.6. On the upside, resistance is expected at ₹270.2, with a potential test of ₹271.2 if prices break above this level. The outlook for zinc remains bullish in the short term, supported by supply constraints and increased demand expectations.