LONDON: Zinc prices rose to their highest in more than three weeks on Monday, boosted by stronger demand expectations as COVID lockdowns ease in top consumer China, low inventories and a sliding dollar.
Benchmark zinc on the London Metal Exchange (LME) was up 1.2% at $3,891 a tonne by 1601 GMT. Prices of the metal used to galvanise steel earlier touched $3,995.50 a tonne, its highest since May 5.
“Optimism about Chinese demand has resurfaced; it looks like restrictions will be lifted gradually,” one zinc trader said. “But, really, the zinc story is all about stocks and output cuts.” LOCKDOWNS: Residents in two Beijing districts have been allowed to return to work while Shanghai edged closer towards lifting its two-month-old COVID-19 lockdown from Wednesday.
INVENTORIES: Zinc stocks in LME-registered warehouses, at 84,700 tonnes, are at their lowest since April 2020. Cancelled warrants — metal earmarked for delivery — at 48% suggest more metal is due to leave LME warehouses.
EUROPE: Shortages of zinc are particularly acute in Europe, where record-high power costs have led to production cuts.
Europe accounts for about 15% of global refined zinc production capacity estimated at about 14 million tonnes in 2022.
Zinc stocks in LME warehouses in Europe stand at 225 tonnes, but only 25 tonnes of this is available to the market.
Worries about supplies have widened the premium for the cash contract over three-month sinc to $25 a tonne, compared with $1 two weeks ago.
TECHNICALS: Zinc prices face resistance at the 50-day moving average of about $4,010 while strong support comes from the 100-day moving average around $3,840.
DOLLAR: A weaker US currency makes dollar-denominated metals cheaper for holders of other currencies, which could boost demand for industrial metals.
OTHER METALS: Copper was up 0.9% at $9,542 a tonne, aluminium rose 0.6% to $2,888, lead gained 0.7% to $2,175, tin added 1.6% to $34,645 and nickel jumped by 3.5% to $29,275.
Traders say a lack of liquidity is behind the large moves in nickel prices.