Zinc price falls on tighter sup­plies and trade woes

Business World - - World Markets -

LON­DON — Zinc fell on Wed­nes­day on trade and in­fla­tion wor­ries, al­though it had ear­lier risen back to­wards a 3-month high reached last week on shrink­ing in­ven­to­ries and smelter cuts in China.

Zinc in­ven­to­ries in LME-reg­is­tered ware­houses fell to 194,575 tons from more than 250,000 tons in Au­gust and are near­ing 10-year lows.

Stock­piles in Shanghai Fu­tures Ex­change store­houses at 29,204 tons are the small­est since 2007.

Pro­duc­tion cut­backs at China’s zinc smelters in re­sponse to tighter en­vi­ron­men­tal checks and weaker prof­its have tight­ened sup­ply.

But the longer-term out­look for zinc is not so bullish, Casper Burg­er­ing, an­a­lyst at ABN Amro, said.

“There’s been in­vest­ments (in zinc min­ing that) are ex­pected to come onto the mar­ket in 2019. That will shift the mar­ket balance. In the short term prices could main­tain these lev­els but (in 2019) price pres­sures will build.”

Also weigh­ing on zinc were lin­ger­ing wor­ries that trade ten­sions will sap growth. The wor­ries, cou­pled with ris­ing US bond yields, pushed world shares down to a three month low.

ZINC: Three-month zinc on the Lon­don Metal Ex­change (LME) closed down 1.8% at $2,629, hav­ing hit $2,715, near­ing last week’s three month high. The metal used to gal­va­nize steel has surged some 18% from Au­gust’s 22-month low of $2,283.

DE­MAND: De­mand for re­fined zinc will ex­ceed sup­ply by 322,000 tons this year, but the gap will nar­row to 72,000 tons in 2019, in­dus­try data showed on Mon­day.

“Zinc, along with nickel, has been the ma­jor ben­e­fi­ciary of fer­rous moves. But (it) should run into ma­jor re­sis­tance be­tween $2,728-52 — the high from Oct. 2,” said Marex Spec­tron in a note.

“Whilst we do ad­vo­cate own­ing dips, the path higher will re­main strewn with rocks… (as) the macro pall hov­ers over the com­plex.”

SPREAD: The pre­mium of cash zinc over the three-month con­tract rose to $41.50, re­vers­ing re­cent falls and sig­nalling a lack of nearby sup­ply.

SHFE: The Shanghai Fu­tures Ex­change (SHFE) will add lead, zinc, tin: and nickel to its new phys­i­cal trad­ing plat­form from Oct. 18, the ex­change said in a state­ment on Wed­nes­day.

COP­PER RESTART: BHP ex­pects a plant at its Olympic Dam mine to restart this month fol­low­ing re­pairs and the com­pany has found a way to deliver re­turns from the as­set as part of a fo­cus on max­i­miz­ing pro­duc­tiv­ity.

PRICES: Cop­per ended down 0.8% at $6,239 a ton; alu­minum closed down 0.4% at $2,047; lead ended down 1.3% at $1,910; nickel closed down 2.6% at $12,680; while tin bucked the trend, clos­ing up 0.7% at $19,025. —

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