Zinc On MCX Settled Up 5.23% At 197.05

Zinc on MCX settled up 5.23% at 197.05 on bets that demand was picking up faster than supply amid a broad-based rally across the metals complex. Markets have long believed zinc was heading for a supply shortfall as demand picked up, and now we are seeing that. The metal, used to protect steel from corroding, has gained nearly 90 percent since bouncing off a 6-1/2 year low of $1,444.50 in January on worries about shortages due to mine closures. The zinc market is expected to see a 400,000 tonne deficit this year.

But this could easily be offset by inventories, which in LME-approved warehouses stand at above 440,000 tonnes, a survey showed. Hidden inventories, estimated at 1.4 million tonnes by Macquarie or about 10 percent of global demand, trickling into the market may also surprise zinc bulls. The global supply pool of zinc has been contracting as reserves are exhausted at huge mines in Australia, Canada and Ireland. Meanwhile other major producing nations such as Peru have seen output drop as richer ores are mined out. Macquarie Bank calculates that global supply plunged by as much as 14.5 percent in the first half of 2016 alone.

Investors continue to add to their long positions, which have now reached an all-time record high on the LME since data was collected in 2014. Technically market is under short covering as market has witnessed drop in open interest by -21.86% to settled at 6130 while prices up 9.8 rupee, now Zinc is getting support at 189.5 and below same could see a test of 181.9 level, And resistance is now likely to be seen at 201.1, a move above could see prices testing 205.1.

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Suhani Verma

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