Zinc falls to 7-week low on out­look of ris­ing sup­ply

Business World - - World Markets -

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. —

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