Zinc on MCX settled down -1.19% at 186.15 as trader booked there long position build last week after the reports that Chinese zinc smelters are planning maintenance that could cut 540,000 tonnes a year of capacity. That could mean a larger than expected zinc deficit this year. China's largest zinc smelters will conduct maintenance procedures affecting 540,000 tonnes of annualized capacity over an unspecified period of time.
Major smelters including Hanzhong Zinc, Shannxi Shanglou, Dongling Fengxiang, Yuguang Gold & Lead, Silver, Huludao and Bayannaoer Zijin met on March 13 in Xi'an to discuss cooperative measures aimed at affecting "extremely unfair deformities in processing fee levels. Capacity maintenance is already underway at Hechi Nanfang Zinc and Huludao, and is due to begin at Shannxi Zinc's Shangluo Smelter and Hanzhong Zinc at the end of March.
While ShFE Zinc rallied 2.1 percent on Monday as traders were expecting the import differential for zinc to turn positive after a steep draw from ShFE warehouses last week and a flurry of smelters announcing maintenance plans. Also ShFE zinc stocks slumped by 8,490 tonnes, or 4.4 percent last Friday from the week before. Meanwhile LME zinc stocks currently stand just below 400,000 mt, much lower than the 1.2 million mt reported in 2013. In addition, it has been reported that more than 100,000 mt of exchange stocks were cancelled over the past two weeks.
That leaves a remaining open tonnage of around 200,000 mt, the lowest since December 2008. Another sign that tightness in the raw materials market is feeding through into the refined metal part of the supply chain. Now technically market is getting support at 185.3 and below same could see a test of 184.3 level, And resistance is now likely to be seen at 187.8, a move above could see prices testing 189.3.