Zinc Prices Take a Hit, Market Reacts to Supply Tightness and Production Gains

Key Takeaways

• Price Movements: LME zinc decreased significantly. MCX prices also fell amid profit-taking.
• Supply Challenges: Ongoing supply tightness is influencing zinc price fluctuations across markets.
• Production Increasing: While China's zinc production is increasing, year-on-year figures show a decline, highlighting potential demand stability.
• Market Reactions: Significant premiums and company announcements indicate ongoing adjustments to supply conditions and market strategies.
• Future Outlook: Expert analysis suggests cautious trading ahead, with key levels to watch for potential price movements in the coming days.

Zinc Prices

• LME: As of last Friday, LME zinc opened at $3,183/mt, low of $3,034/mt, and finally closing down at $3,099.5/mt, a decrease of $74.5/mt or 2.35%. Today, LME Zinc trading commenced at 3,085/mt.
• SHFE: As of last Friday, the most-traded SHFE zinc 2412 contract opened at 24,915 yuan/mt, hitting a high of 25,090 yuan/mt and a low of 24,865 yuan/mt, finally closing down at 25,005 yuan/mt, a decrease of 25 yuan/mt or 0.10%. Today, SHFE Zinc trading commenced at 24,970 yuan/mt.
• MCX: As of last Friday, MCX Zinc prices opened at Rs 289.70/kg, reached the highest level of Rs 289.85/kg, the lowest level at Rs 282.65/kg and finally closed down at Rs 287.35/kg, a decrease of 7.20 or 2.44%. Today, MCX Zinc trading commenced at Rs 283.85/kg.

Zinc Supply & Demand

• LME Opening Stock - 242425 | Live Warrants - 225250 | Cancelled Warrants - 17175
• LME: Trading volume decreased to 103,000 lots, and open interest rose by 1,031 lots to 258,000. LME zinc saw a V-shaped reversal, with inventory up 3,275 mt to 242,425 mt. Ongoing international tensions and supply-side tightness are causing price fluctuations.
• SHFE: Trading volume fell to 80,425 lots, and open interest dropped by 1,400 lots to 114,000. SHFE zinc showed a small bullish candlestick, supported by tight supply at high levels.
• MCX: Zinc prices fell 1.63% to 287.35 due to profit booking, as China’s refined production rose over 2% in September. A significant premium for cash zinc over the three-month contract indicates tight supply.
• Global zinc markets showed a larger deficit, rising to 66,300 tons in August from 51,000 tons in July, according to the International Lead and Zinc Study Group (ILZSG). While China's refined zinc production increased over 2% month-on-month (MoM), it was down by over 8% year-on-year (YoY).

Zinc News

• Zinc prices on the Shanghai Futures Exchange (SHFE) are fluctuating at high levels due to tight supply conditions.
• Zinc prices on the Multi Commodity Exchange (MCX) have fallen as profit booking takes place, coinciding with a 2% increase in China's refined zinc production in September.
• Korea Zinc announced a $1.5 billion buyback, securing 9.85% of its shares to prevent stakeholders from selling to its largest investor, Young Poong, and private equity firm MBK.
• Hindustan Zinc intends to double its production capacity to 2 million tons over the next five years by investing up to $2 billion. Since the majority of the mining infrastructure is already in place, the investment is between Rs 14,000 crore and Rs 17,000 crore, according to the company’s CEO, Arun Misra.

Expert Opinion

• In experts’ opinion, zinc is experiencing long liquidation, with open interest dropping by 6.97% to 2,471 contracts as prices fell by Rs 4.75. Zinc finds support at 283.4, with further support at 279.4, while resistance is at 290.6. A move above 290.6 could see prices testing 293.8.