Zinc hits two-week low on strong greenback

LONDON — Zinc fell for a third session on Tuesday, hitting its lowest in more than two weeks as the dollar held near a two-month high and investors remained concerned about global economic growth.

In wider markets, global equities rallied as investors grew more optimistic about US-China trade talks and cheered Washington’s deal to avoid another government shutdown, but this was not enough to lift metals.

“The rational for higher (metals) prices right now is not stacking up,” said Bank of AmericaMerrill Lynch analyst Michael Widmer.

“There (has been) higher confidence that maybe if we get a trade deal we’ll get higher prices, if China data improves we’ll get higher prices. But realistically, for now, the US is slowing, Europe is going nowhere and China is finding it hard to stimulate its economy.”

He added, however, that zinc should find support at about $2,400 to $2,500 a ton because of tight stocks.

Benchmark zinc on the London Metal Exchange (LME) shot up by nearly a fifth in the month to Feb. 5, when it touched a sevenmonth peak of $2,810 a ton, but has since slipped. It ended down 1.4% at $2,608 a ton, having hit a low of $2,602.50.

Underpinning zinc, data showed LME inventories of the metal eroded further to their lowest since January 2008.

Zinc attracted additional selling on Monday after it breached the 200-day moving average at $2,662.51.

Cash zinc traded at a premium of $1 a ton to the three-month price, off a high of $125 in early December last year, although Citi said the reduced tightness in the spreads was lulling the market into “a false sense of looseness.”

“The seasonal demand pick-up in the second quarter has the potential to almost wipe out (zinc) exchange stocks,” Citi said.

“Our short-term point price target remains $2,800, but by the end of the year we expect zinc to trade down to $2,400.”

US Trade Representative Robert Lighthizer arrived in the Chinese capital on Tuesday ahead of high-level trade talks scheduled this week for the world’s two largest economies to hammer out an agreement ahead of a March 1 deadline.

Among other industrial metals, copper ended 0.7% down at $6,106, aluminum lost one percent to $1,862; lead ended down 0.5% at $2,035; nickel closed 0.6% down at $12,410 and tin finished down 0.5% at $20,925. —