Zinc Jumps: What Lies Ahead After the Smelter Shutdown Shock?

Zinc prices rose by more than one percent yesterday. The gain comes after prices on the London Metal Exchange (LME) rose to $2,615 a tonne, the highest since January 3, when Nyrstar said it would stop zinc smelting at its plant in Budel, the Netherlands in the second half of January.

Zinc held near $2,500 a tonne, falling to a more than 7-month high in late December, as investors continued to weigh on the industry’s outlook after US data dampened expectations of earlier easing by the Federal Reserve. The zinc market is on track for another surplus in 2024, with production growth expected to exceed demand

However, support for the metal comes from hopes of a full economic recovery in top consumer China.

According to the latest data, the country’s exports grew more than expected in December, which indicates a gradual improvement in trade. Meanwhile, another month of consumer and producer deflation prompted investors to bet on lower interest rates from China and the central bank #039.

In addition, the dollar is an important factor in boosting base metals. Prices are struggling to stay high due to the strength of the greenback.

The Hindu was also disappointed by the inaction of China’s central bank.  The central bank left their medium-term benchmark unchanged on Monday, defying market expectations for a cut, as a weaker currency limited short-term monetary easing to revive the economy.

A stronger US currency makes dollar-denominated metals more expensive for holders of other currencies, which can dampen demand.  Base metals markets await data on Chinese investment, industrial production, GDP and housing prices on Wednesday for indications of future global demand and the largest metal consumer.

Nyrstar suspends zinc production at Budel due to high energy costs and difficult market conditions.

Technical Outlook – Zinc:

The Zinc prices rebounded from the day’s low 223.20 and settled at 225.45, up 1.14%. That was highest intraday gains since 27 December 2023.

A long bullish candle stick pattern is indicating for a strong buying activity from the lower levels. Adding to this, prices found support from its one-month consolidation zone which also providing for strength in the zinc prices in near future.

On the upside, immediate resistance is seen at 227.50 and a break above prices may test previous high 231.00-233.20 very soon. Else, any short time deep towards 223.50-222 will attract buying activities.

On the downside, crucial support is seen at 220.00 below it prices may retreat towards 218.80-215.00.

Commodity Samachar
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