Zinc On MCX Settled Down -2.11% At 171.95

Zinc on MCX settled down -2.11% at 171.95 as supply tightness eased recently after restarts at mines driven by high zinc prices The discount of LME cash zinc to the three-month contract shrank to $23.80 a tonne from $27.75 earlier in the week, but stayed around its largest since November 2015. Supply-side developments may also be at play, with Votorantim saying Cajamarquilla in Peru would resume operations at 50% of capacity after a period of suspension due to floods. Refined zinc supply remains resilient, especially in China where refined production rose by 4.4% year-on-year in the first two months of 2017.

But Chinese smelters may prove less resilient in the coming months after they announced that 540,000 tpy of capacity would be put on maintenance for unspecified period. The LME spec positioning in zinc looks fairly elevated considering that the net spec length – at 78,473 lots as of March 24 – is at 79% of the all-time record (99,251 lots) from 2015. So this bout of long liquidation should not surprise investors. The ILZSG estimates that the market was in a deficit of 27,400 tonnes in January 2017 compared with a surplus of 6,000 tonnes in January 2016. 

The zinc market was in a deficit of 268,000 tonnes in 2016 compared with a surplus of 189,000 tonnes in 2015. The tighter fundamentals were driven by the demand side rather than the supply side, essentially owing to a notable surge in US apparent demand. Technically market is under fresh selling as market has witnessed gain in open interest by 10.08% to settled at 5178 while prices down -3.7 rupees, now Zinc is getting support at 169.7 and below same could see a test of 167.3 level, And resistance is now likely to be seen at 175.3, a move above could see prices testing 178.5.

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Suhani Verma

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