Zinc Prices Show Positive Movement Amid Supply Concerns and Production Cut Rumors

Key Insights

• Price Movement: Zinc prices rose across major markets, with LME, SHFE, and MCX all showing gains, driven by supply concerns and speculation about production cuts.
• Supply Issues: Zinc inventories at LME and SHFE declined, pointing to tightening supplies, while China’s zinc production also faced setbacks, supporting prices.
• Demand Factors: Downstream consumption remained steady, helping sustain zinc prices, while industrial output in China rose, boosting sentiment.
• Hindustan Zinc’s Strong Performance: The company reported a 35% YoY profit increase, further supporting market optimism.
• Expert Outlook: Zinc prices are expected to trade within a range of Rs 274.6 to Rs 284, with potential for further gains if key resistance levels are breached.

Zinc Prices

• LME: As of yesterday, LME zinc opened at $2,982.5/mt, reaching a high of $3,019/mt and low of $2,963/mt, finally closed up at $3,003.5/mt, an increase of $27/mt or 0.91%. Today, LME Zinc trading commenced at 3,000/mt.
• SHFE: As of yesterday, the most-traded SHFE zinc 2412 contract opened at 25,255 yuan/mt, hitting a high of 25,340 yuan/mt and low of 25,165 yuan/mt. It finally closed flat at 25,185 yuan/mt. Today, SHFE Zinc trading commenced at 25,170 yuan/mt.
• MCX: As of yesterday, MCX Zinc prices opened at Rs 279.20/kg, reached the highest level of Rs 281/kg, the lowest level at Rs 276.35/kg and finally closed down at Rs 280.55/kg, an increase of 1.35 or 0.48%. Today, MCX Zinc trading commenced at Rs 280.10/kg.

Zinc Supply & Demand

• LME Opening Stock - 264625 | Live Warrants - 249125 | Cancelled Warrants - 15500
• LME: Zinc trading volume decreased to 9,151 lots, but open interest increased by 1,966 lots to 243,000. LME zinc has seen five consecutive days of gains, supported by moving averages, and inventory dropped by 3,700 mt to 264,625 mt, reflecting ongoing supply-side issues. Zinc prices are driven upward by continued support from long funds.
• SHFE: Trading volume decreased to 56,418 lots, while open interest fell by 1,375 lots to 95,789. Despite a shift from gains to losses, zinc's daily K-line remained positive, buoyed by moving averages. SMM social inventory fell by 9,200 mt to 118,700 mt, with moderate downstream consumption helping sustain prices.
• MCX: Zinc prices rose by 0.48% to Rs 280.55, driven by speculation around potential production cuts and improved consumption. Spot premiums remained high, supporting the price. Zinc ore shortages, highlighted by an 18.17% drop in imported concentrate in October, have fueled demand concerns.
• China's industrial output rose by 5.3% YoY in October, while zinc inventories in key regions fell. Despite this, the global zinc deficit narrowed slightly to 79,500 mt in September, compared to 85,000 mt in August. Year-to-date, the market has seen a deficit of 8,000 mt, a stark contrast to a surplus in the previous year.

Zinc News

• MCX Zinc rose after market rumors of production cuts have resurfaced.
• Hindustan Zinc Ltd on Friday reported a 35% year-on-year rise in its consolidated net profit for the fiscal's second quarter ended September (Q2FY25) to Rs 2,327 crore. The company had reported a profit of Rs 1,729 crore in the year-ago period. Sequentially, consolidated net profit was down nearly 1% from Rs 2,345 crore in Q1FY25.
• Zinc futures broke out of a key resistance at Rs 275 towards the end of September. However, post the breakout, the price did not rise much. It did not fall either. The price was largely moving in a range and the contract is yet to set a direction. A potential recovery can lift the November contract to Rs 290/kg.

Expert Opinion

• In experts’ opinion, the market saw short covering with a 31.83% drop in open interest, settling at 1,418 contracts. Zinc prices find support at Rs 277.6, with a further downside test possible at Rs 274.6. Resistance is pegged at Rs 282.3, and a break above this level could drive prices toward Rs 284. Zinc trading range for the day is 274.6-284.