METALS-Zinc falls to 7-week low on expectations of rising supply

04:30' PM - Thursday, 08/11/2018

Zinc prices on Wednesday fell to a seven-week low on expectations that a supply crunch will ease. Benchmark zinc on the London Metal Exchange (LME) closed down 1.8 percent at $2,455 a tonne after touching $2,445, the lowest since Sept. 21.

"Smelter margins in China are picking up and the expectation is that production is set to trend higher into year-end," said Deutsche Bank analyst Nick Snowdon.

"There has been a big build in (zinc) concentrate stocks (in China) in the last quarter or so ... with treatment charges picking up and prices stabilising there's a clear incentive for smelters to ramp up output," he said.

Prices of zinc, used to galvanise steel, fell 26 percent over June-August but have recovered from August's low of $2,283.

China is the biggest producer and consumer of zinc.

ZINC STOCKS: Headline inventories in the LME warehouse system continue to fall. At 134,750 tonnes they are close to a 10-year low of 131,775 tonnes reached in March.

SPREAD: The premium for cash zinc over the three-month contract MZN0-3 at $47.50 has eased from highs around $60 in late October, but signals that shortages of nearby supply remain.

DEFICIT: The roughly 13.5 million tonne global zinc market had a deficit of 292,000 tonnes in the first eight months of the year, the International Lead and Zinc Study Group (ILZSG) said.

DOLLAR: Providing some support to metals prices was the dollar, which weakened after gains by the Democrats in U.S. elections cast doubt on further tax cuts.

A lower dollar makes metals cheaper for buyers with other currencies.

CHINA: Despite fears that a U.S.-China trade dispute will undermine China's economy, exports from the country are expected to have expanded at a healthy clip in October as businesses frontal orders before higher U.S. tariffs set in at the turn of the year, a Reuters poll showed.

YUAN: In a sign that authorities may be stepping up interventions to keep the yuan from weakening, China's foreign exchange reserves fell more than expected to an 18-month low in October.

CHINA ALUMINA: China's exports of aluminium raw material alumina last month were roughly equal to September's bumper volumes, the president of Aluminium Corp of China said.

PRICES: LME copper closed down 0.1 percent at $6,153 a tonne, aluminium finished 1.7 percent higher at $1,984.50, lead rose 1 percent to $1,927.50, tin ended unchanged at $19,050 and nickel rose 0.4 percent to $11,820. - Reuters -

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