Zinc Prices Surge on Optimism Over US Interest Rate Cuts and Supply Challenges

Zinc Price

• LME: As of yesterday, LME zinc opened at $2,706/ton, hitting a high of $2,800/ton and low of $2,692/ton, ending up $90/ton at $2,797/to, an increase of 3.32%. Today, LME Zinc trading commenced at $2,795.50/ton.
• SHFE: As of yesterday, the most-traded SHFE 2410 zinc contract opened at 23,025 yuan/ton, reaching a high of 23,095 yuan/ton and low of 22,820 yuan/ton, finally closing up 140 yuan/ton at 23,085 yuan/ton, an increase of 0.61%. Today, SHFE Zinc trading commenced at 23,585 yuan/ton.
• MCX: As of yesterday, zinc prices opened at Rs 255.45/kg, reached the highest level of Rs 259.85/kg, the lowest level at Rs 254.85/kg and finally closed down at Rs 259.30/kg, a rise of Rs 4.65 or 1.83%. Today, MCX Zinc trading commenced at Rs 260/kg.

Zinc Supply & Demand

• LME Opening Stock - 232725 | Live Warrants - 206025 | Cancelled Warrants - 26700
• LME: Trading volume increased to 13,494 lots, and open interest rose by 1,100 lots to 236,000 lots. Overnight, LME zinc recorded a bullish candlestick, with support from the lower Bollinger Band. LME zinc inventory decreased by 1,725 ton to 232,725 ton, a decrease of 0.74%. The US August non-seasonally adjusted year-on-year CPI was recorded at 2.5%, lower than market expectations, marking the fifth consecutive monthly decline and the lowest level since February 2021. Investors' expectations for a rate cut by the US Fed next week continued, bolstering the rise of LME zinc.
• SHFE: Trading volume decreased to 91,897 lots, and open interest decreased by 2,455 lots to 84,017 lots. Overnight, SHFE zinc recorded a bullish candlestick, with support from the 10-day moving average below. Both domestic and imported ore TC remained low. The weak supply fundamentals continued, coupled with market optimism about US Fed interest rate cuts, driving SHFE zinc higher as well.
• MCX: Zinc prices rose by 1.83% to Rs 259.3, driven by optimism surrounding a potential interest rate cut by the Federal Reserve. In China, exports increased by 4.6% year-on-year in August 2024, down from 7% in July, while imports rose 2.5% year-on-year, surpassing expectations but easing sharply from the previous month. These figures reflect the mixed pace of recovery in China, a significant zinc consumer. LME zinc inventories also showed notable changes, with total stock rising 2.6% to 217,575 tons in August. Spain-origin zinc dominated, accounting for 38.7% of total LME inventory. India-origin zinc stocks rose to 63,050 tons, and Australia-origin zinc also increased, signalling a well-supplied market.
• Total open-tonnage volumes of zinc in LME warehouses amounted to 217,575 tons on August 30, up 2.6% from 211,975 tons at the end of July. Spain-origin zinc continued to dominate the LME inventory, making up 38.7% of total stock. There were 84,100 tons of Spain-origin zinc in LME warehouses on August 30, up by 8.1% from 77,775 tons a month prior.
• Meanwhile, India-origin zinc also rose to 63,050 tons in August, up 3.3% from 61,025 tons in July. Australia-origin zinc made up the third-largest proportion of zinc stock, totaling 21,875 tons on August 30, up 13.9% from 19,200 tons a month prior. But Brazil-origin zinc stock in LME warehouses dropped significantly in August, totaling 4,725 tons, down by 55.7% from 10,675 tons at the end of July.

Zinc News

• US August CPI year-on-year rate fell for the fifth consecutive month, and the core CPI year-on-year rate remained the same as the previous value. Interest rate futures showed that the probability of a 50-basis-point rate cut by the US Fed in September was only 17%.
• Zinc Rises on Optimism Over a Potential Federal Reserve Interest Rate Cut This Month.
• Lundin’s two copper and zinc mining operations in Europe — Sweden’s Zinkgruvan and Portugal’s Neves-Corvo — went on sale earlier this year as the Vancouver-based company turns its focus to Latin America. The mines are Lundin’s oldest assets and generated about 19% of the company’s revenue last year. Lundin CEO said potential buyers are eyeing its European mines.
• Swedish miner Boliden said on Thursday the expansion of its Odda zinc smelter in Norway will take longer than expected and that the cost will increase by 100 million euros ($110.16 million).

Expert Opinion

• In experts’ opinion, the zinc market is under a short covering, with open interest dropping by 17.72% to 2,094 as prices climbed Rs 4.65. Zinc has immediate support at Rs 256.2, with a break below potentially testing Rs 253. Resistance is expected at Rs 261.2, and a move above this level could lead prices toward Rs 263.