Zinc prices increased by 0.25% to 217.55 yesterday, mainly due to supply-side developments. Short-term supply outlooks have tightened as a result of the plant fire and Western sanctions that delayed the start of production at Russia’s new Ozernoye mine.
The mine was supposed to begin production in 2023. But it didn’t begin until at least the 3rd quarter of 2024. And it isn’t expect to reach full capacity until 2025.
This shows how difficult the zinc market is. Sustained price increases, however, are reliant on a notable increase in the market’s demand for zinc and a move away from worries about anticipated surpluses. Especially when considering zinc’s use in galvanising steel.
The market sentiment has not significantly changed despite these disruptions in supply of zinc, as seen by the stability of the cash over three-month zinc agreements discount on LME over the last nine months.
Deliveries of zinc to LME-registered warehouses have increased by almost 200% since November to 199,125 tonnes, suggesting that there isn’t any immediate supply pressure. This is another indication of surpluses.
The global zinc market deficits, however, increased to 71,600 metric tonnes in November 2023 from 62,500 tonnes in October, according to data from the ILZSG.
Technically speaking, the market saw short covering as (zinc) prices rose by 0.55 rupees and open interest decreased by -0.77% to close at 4381.
Zinc is presently finding support at 216.7, and a downside test at 215.7 is possible. Resistance on the upside is expect to be at 218.7, and a breakout there could lead to a test of 219.7.