Zinc falls to 7-week low on outlook of rising supply
LONDON — Zinc prices on Wednesday fell to a seven-week low on expectations that a supply crunch will ease.
Benchmark zinc on the London Metal Exchange (LME) closed down 1.8% at $2,455 a ton after touching $2,445, the lowest since Sept. 21.
“Smelter margins in China are picking up and the expectation is that production is set to trend higher into yearend,” said Deutsche Bank analyst Nick Snowdon. “There has been a big build in (zinc) concentrate stocks (in China) in the last quarter or so…with treatment charges picking up and prices stabilizing there’s a clear incentive for smelters to ramp up output.”
Prices of zinc, used to galvanize steel, fell 26% over JuneAugust but have recovered from August’s low of $2,283.
China is the biggest producer and consumer of zinc.
Headline inventories in the LME warehouse system continue to fall. At 134,750 tons they are close to a 10-year low of 131,775 tons reached in March.
The premium for cash zinc over the three-month contract at $47.50 has eased from highs around $60 in late October, but signals that shortages of nearby supply remain.
The roughly 13.5 million ton global zinc market had a deficit of 292,000 tons in the first eight months of the year, the International Lead and Zinc Study Group said.
Providing some support to metals prices was the dollar, which weakened after gains by the Democrats in US elections cast doubt on further tax cuts.
A lower dollar makes metals cheaper for buyers with other currencies.
Despite fears that a US-China trade dispute will undermine China’s economy, exports from the country are expected to have expanded at a healthy clip in October as businesses frontal orders before higher US tariffs set in at the turn of the year, a Reuters poll showed.
In a sign that authorities may be stepping up interventions to keep the yuan from weakening, China’s foreign exchange reserves fell more than expected to an 18-month low in October.
China’s exports of aluminum raw material alumina last month were roughly equal to September’s bumper volumes, the president of Aluminum Corp. of China said.
LME copper closed down 0.1% at $6,153 a ton; aluminum finished 1.7% higher at $1,984.50; lead rose by one percent to $1,927.50; tin ended unchanged at $19,050; and nickel rose 0.4% to $11,820. —