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January 2019 | Base Metals


Zinc: Negative themes overdone


The year 2019 is expected to mark a transition for the zinc market’s fundamentals as rising concentrate supply gradually rebalances the refined market. Capacity utilization at Chinese smelters will be key, but they are unlikely to lift production until after the Lunar New Year, and even then it may be a slow ramp-up to begin with. In the meantime, fresh LME warrant cancellations and forward-buying will draw on already low global stocks. With a price base forming around $2,400 per tonne, short-term price risks are shifting to the upside.

Modest price rebound underway
Zinc prices are firmer this week, bolstered by rebounding risk sentiment following stronger-than-expected US employment data, optimism over US-China trade negotiations, a softer dollar and Chinese monetary stimulus.

Despite this, trading so far in 2019 has proven turbulent, after zinc set a three-month low of $2,356.50 per tonne on January 3 as disappointing manufacturing PMI data – particularly from China – data triggered selling in illiquid conditions. Globally, the JP Morgan index showed activity at a 27-month low in December.

Chinese authorities responding...

Chinese authorities have responded though. The PBOC will cut the...

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