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Zinc Fundamental Update

After the success of our previous report, we once again reiterate our positive stance on Zinc

• After falling 50% from peak of 2022, LME zinc prices have surged from lows of $2,215 to $2,600 in a span of last 6 months , driven by an improved demand outlook

• China is the biggest consumer of zinc and continued stimulus activity will help boost its economy, which could be supportive for prices.

• There is an evident tug of war visible at the LME warehouse with rapid deposits and withdrawals of inventories, which has also been swinging the cash-3M spread.

• Global refined zinc market is expected to be in a surplus of 248,000 tons in 2023, flipping its forecast from a deficit of 45,000 tons

• Inventory are shallow and constrained Cash-3M spreads are indicating persistent supply constraints, despite increased domestic production

• After a sudden spurt, LME inventories have started to deplete once again, while ShFE stocks are at 33500 tons compared to over 2 lakhs in 2020

• At around $2,265 - 2,300, small and medium-sized zinc mines, particularly in Europe and Australia, are grappling with profitability challenges

• Some miners have already announced production cuts citing lower prices, including Nystar, Almina-Minas do Alentejo in Aljustrel, with more to follow if prices continue to trade lower

• Overall, the fundamentals are getting better with Chinese recovery, production cuts and which could help continue the positive momentum.

MCX Zinc Technical Update

• MCX Zinc prices have decisively breached above the resistance of Ascending Triangle pattern on daily chart which was placed near Rs.228.50 level. With prices trading within an upward sloping channel. The next leg of the move is likely to push prices towards the upper band of the channel placed at Rs.238 and further extend the rally towards Rs.244 level.

• The 14- period RSI on daily chart has crossed above 60 mark which signals that counter is gaining strength in momentum on the higher side. Critical support is now placed near the lower bound of the triangle placed at Rs.218 level.

• We recommend to create long positions in the counter at Rs.229 and add on correction towards Rs.224, with stop loss below Rs.218 level on closing basis with expected targets towards Rs.238 and Rs.244 levels.

LME Zinc Technical Update

• LME Zinc prices have picked up momentum since last three trading sessions. Prices have recently formed a base at 100 EMA (Exponential Moving Average) on daily chart which is placed at $2500 level. The next leg of rally is likely to push prices towards $2730 and extend the rally further towards $2780 level.

• The 14-period RSI on daily chart has climbed above 60 mark which signals strength in momentum on the higher side. Critical support is now placed near $2480 level.

• We recommend to create long positions in the counter at $2620 and add further positions near $2560 levels for upside targets of $2730 and $2780 levels. Our view will be negated if prices break below $2480 level on closing basis.

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