Zinc falls on weak steel demand, strong dollar

Zinc prices slid on Wednesday to hit their lowest in more than three weeks, as a firm dollar and weakening demand from the steel sector weighed on the market.

Three-month zinc on the London Metal Exchange (LME) eased 0.4% to $2,432 per metric ton by 0221 GMT, having fallen to a low of $2,430 earlier in the session, the weakest since March 4.

The most-traded May zinc contract on the Shanghai Futures Exchange (SHFE) shed 1.8% to 20,765 yuan ($2,873.33) a ton.

Earlier in the session, it lost as much as 2% to 20,740 yuan, the lowest since March 6.

Zinc inventories in LME and SHFE warehouses have been rising, pushing the discount of the LME cash zinc contract to the three-month contract to $50.83 a ton on Tuesday, the biggest since November 1991.

In top consumer China, a lack of sufficient capital has slowed the construction of infrastructure and property projects in the first quarter of 2024, weakening demand for zinc.

The dollar steadied in the wake of more strong US economic data.

Weak demand drives zinc to its lowest since July 2020

A stronger dollar makes the greenback-priced metals more expensive for other currency holders.LME copper shed 0.5% to $8,822 a ton, aluminium declined 0.5% to $2,291.50, nickel edged down 0.2% at $16,605, lead fell 0.3% to $2,013.50 and tin lost 0.2% to $27,400.

SHFE copper was 0.3% lower at 71,950 yuan a ton, aluminium declined 0.9% to 19,370 yuan, nickel dropped 2.4% to 129,440 yuan, lead eased 0.3% to 16,140 yuan and tin edged down 0.3% to 222,790 yuan.

Copper prices pulled back on Thursday as investors shed some of their bullish positions after the market failed to sustain fresh highs.

Three-month copper on the London Metal Exchange slipped 0.6% to $8,535.50 per metric ton by 1045 GMT after it briefly touched a 4-1/2-month peak on Wednesday, but closed slightly weaker. “The rejection yesterday is still reverberating in the market today with the failure to gain a foothold above the recent highs,” said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen.

“It’s setting up a interesting start to next year because we’ve been in an uptrend since October and the question is whether it can be maintained.” LME copper has gained about 9% since hitting an 11-month low of $7,856 on Oct. 23.

“The market is most certainly looking for additional support from

China next year and also for the green transition to gain momentum,” Hansen added. LME zinc was the biggest decliner on the exchange, dropping 1.2% to $2,543 a ton on worries about oversupply after more arrivals of metal into LME warehouses brought the total to the highest levels since September 2021.

LME nickel was little changed at $16,855 a ton while the most-traded January nickel contract on the Shanghai Futures Exchange dropped 1.3% to 129,830 yuan ($18,169.22) a ton.

On a year-to-date basis, LME nickel is down 44% and SHFE nickel has dropped 35%, making the metal the worst performer across the nonferrous metals complex on the two bourses.

“Nickel supply continues to grow, but consumption has not improved. The surplus pattern continues, and nickel supply and demand are bearish,” said Huatai Futures in a report.