Zinc On MCX Settled Down -3.56% At 162.50


Zinc on MCX settled down -3.56% at 162.50 as weakness seen after LME Zinc hit three-month lows on Tuesday as geopolitical worries from sabre-rattling over North Korea to a snap UK general election hurt investor appetite for cyclical assets such as base metals. After doubling in price since the beginning of 2016, prices are now struggling in the $3,000 per metric ton level. However, the price weakness seems to come from long position buyers exiting those positions rather than shorts coming to the market. This suggests that sentiment hasn’t shifted to bearish for now. At the same time, we see strong support near $2,500/mt, which could provide a good opportunity to time purchases.

The recent price weakness can be attributed to fears that high prices could trigger more mine supply to come online in China. Refined zinc supply remains resilient in the country, where refined production rose by 4.4% year-on-year in the first two months of 2017. However, they might prove less resilient in the coming months after some of China’s largest zinc smelters jointly announced they will curtail roughly 540,000 mt of annualized capacity over an unspecified period of time. The announcement comes after China’s largest zinc smelter, Zhuzhou, started an indefinite maintenance period for 100,000 mt of smelting capacity earlier in March.

In addition, the second-largest zinc plant in North America has been running at a 50% of normal operating levels since a strike began on February 12. Typical annual zinc production at the plant is 270,000-275,000 mt a year. Now technically market is getting support at 160.2 and below same could see a test of 157.8 level, And resistance is now likely to be seen at 166.7, a move above could see prices testing 170.8. 
 
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Suhani Verma

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