Zinc On MCX Settled Up 0.67%

Zinc on MCX settled up 0.67% at 164.7 as support seen amid hopes of refined zinc market deficit and higher premiums. Combined zinc inventories in Shanghai, Tianjin and Guangdong decreased 16,500 to 145,200 tonnes last week Zinc inventories fell across Shanghai, Tianjin and Guangdong. Total inventories in the three regions are expected to continue falling this week but declines will be less significant with influx of imported zinc in Shanghai.

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.

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.

In the week ahead, investors will be looking to U.S. reports on building permits, housing starts, industrial production and jobless claims for fresh indications on the strength of the economy. Technically market is under short covering as market has witnessed drop in open interest by -0.03% to settled at 3461 while prices up 1.1 rupees, now Zinc is getting support at 164 and below same could see a test of 163.1 level, And resistance is now likely to be seen at 165.9, a move above could see prices testing 166.9.

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Suhani Verma

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