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Forecasts and market analysis based on price assessments from Fastmarkets MB and Fastmarkets AMM

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July 2019 | Base Metals


Zinc: Potential bear trap in the making


Sentiment towards zinc remains extremely weak at the start of H2. But ongoing restraint among Chinese smelters is maintaining structural tightness, at least for the time being, while fresh warrant cancellations and easier spreads could see exchange stocks depleted again from already-low levels. If availability does start to re-tighten, zinc risks becoming a bear trap given recent positioning trends, particularly with liquidity set to thin during the summer.

Year-to-date price low within sight
Despite supportive fundamentals, zinc prices have come under renewed pressure across the past week, with the LME three-month benchmark setting six-month low of $2,387 per tonne on Friday July 5, bringing it within touching distance of the year-to-date low of $2,356 per tonne from January 3.

LME spreads point to a to pick up in forward buying

In addition, zinc spreads have been in flux recently, easing significantly last week. The LME cash/three-month spread settled at a contango of $3 per tonne Friday, compared with a backwardation of $70 per tonne on Friday June...

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