Zinc On MCX Settled Down -1.65%

Zinc on MCX settled down -1.65% at 163.6 as pressure seen after LME prices closed down 1.4 percent at $2,554 as mine output rises despite of hopes of refined zinc market deficit and higher premiums. A deficit in refined zinc remains elusive some 18 months after massive mine cuts rocked the market and powered exchange prices to nine-year highs, with large-scale smelter cuts yet to materialise.

Zinc smelters have avoided reducing output primarily due to the market’s structurally low metal payables for concentrate and "free zinc" priced at high value due to last year’s rally. Spot premiums on zinc in Guangdong rose above those in Tianjin and Shanghai due to tightening supply. Spot premiums on zinc in Guangdong expanded 30-40 yuan from last week to 300 yuan per tonne over July zinc on the SHFE. China’s refined zinc production fell to 413,000 tonnes in April 2017, a drop of 3.95% month-on-month and 5.92% year-on-year.

Total refined zinc output in the first four months of the year was 1.711 million tonnes, a fall of 1.84% on a yearly basis. Lower zinc prices and domestic zinc concentrate TCs ate into profit at domestic zinc smelters. Besides, enhanced environmental protection in some regions affected mine production, tightening raw material supply for zinc smelters. Glencore said in its Q1 earnings report its zinc production at self-owned mines rose 9% on a yearly basis to 279,200 tonnes in the first quarter of 2017 due to steady production at Antamina mine.

Technically market is under long liquidation as market has witnessed drop in open interest by -2.45% to settled at 3462, now Zinc is getting support at 162.2 and below same could see a test of 160.6 level, And resistance is now likely to be seen at 166.5, a move above could see prices testing 169.2.

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Suhani Verma

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