Log in
Forgot password ?
Become a member for free
Sign up
Sign up
New member
Sign up for FREE
New customer
Discover our services
Dynamic quotes 


SummaryMost relevantAll NewsOther languagesMarketScreener Strategies

Zinc price outperforms, China steel demand a strong tailwind

08/25/2020 | 08:14am EDT
Dump truck and drill are seen at open-pit mine of Gorevsky GOK lead and zinc ore mining and processing plant near Novoangarsk

A tailwind for zinc demand from booming Chinese steel production has pushed prices of the galvanizing metal to their highest in more than nine months and helped it outperform other metals.

Yet data such as warehouse stock levels suggest further significant gains are unlikely.

Massive stimulus measures by Chinese authorities to offset the damage to economic growth from COVID-19 lockdowns has boosted demand for zinc and steel. Global zinc demand is estimated at around 14 million tonnes this year.

Benchmark zinc prices on the London Metal Exchange touched $2,525 a tonne this month, a gain of 11% since the start of the year compared with nearly 9% for copper and a small loss for aluminium.

Graphic: Zinc outperforms https://fingfx.thomsonreuters.com/gfx/ce/jznvnxzgevl/Zinc%20outperformance.PNG

"Strong galvanised steel production in China is behind zinc's rally," a source at a commodity trading firm said. "But LME stocks are up, meaning weakness outside China and excess supply."

Data from the World Steel Association shows global crude steel production fell 2.5% to 152.7 million tonnes in July from a year earlier, but in China output jumped more than 9% to 94.4 million tonnes.

Graphic: Crude steel production https://fingfx.thomsonreuters.com/gfx/ce/ygdpzmwgqvw/crude%20steel.PNG

"The bulk of (China's) galvanised steel-consuming sectors such as autos and machinery are gathering momentum," analysts at Macquarie said in a note.

"We calculate using (China's) year to date growth figure that highway investment has grown by an average of 12% since May and railway by almost 20%, despite a cooling evident in July," the Macquarie analysts said.

The strength of Chinese demand is seen in zinc prices and tumbling stocks in warehouses monitored by the Shanghai Futures Exchange <ZN-STX-SGH>, which at 77,629 tonnes have dropped more than 50% since March.

Graphic: LME zinc stocks and prices https://fingfx.thomsonreuters.com/gfx/ce/yzdpxxreypx/LME%20zinc%20stocks%20and%20prices.PNG

Outside China however, the coronavirus crisis is still taking its toll. Analysts at Citi expect the zinc market surplus to climb to more than 500,000 tonnes from a shortfall of 231,000 tonnes in 2019.

Some of that surplus has already found its way to LME registered warehouses <MZNSTX-TOTAL>, where stocks at 224,300 tonnes compare with a number below 50,000 tonnes in February.

Ample supplies on the LME market have seen cash zinc over the three-month contract trade at a discount of $26 a tonne, the highest since April 2017 <CMZN0-3>.

Graphic: Shanghai zinc stocks and prices https://fingfx.thomsonreuters.com/gfx/ce/nmopaqjzxpa/Shanghai%20zinc%20stocks%20and%20prices.PNG

By Pratima Desai

© Reuters 2020
Stocks mentioned in the article
ChangeLast1st jan.
CHINA STEEL CORPORATION -2.07% 35.4 End-of-day quote.43.03%
MACQUARIE GROUP LIMITED -0.10% 153.4 End-of-day quote.10.77%
S&P GSCI ZINC INDEX 0.28% 227.5238 Delayed Quote.4.15%
All news about LME ZINC CASH
06/12Miners Try to Get Covid-19 Vaccines Into Areas Where Shots Are Scarce
06/10Miners' Efforts to Attract More Female Workers Fall Flat
06/03Rio Tinto Adds Ex-Aboriginal Affairs Minister Ben Wyatt to Board
06/01Biden Administration Suspends Oil Leases in Arctic Refuge--7th Update
06/01Biden Administration to Suspend Oil Leases in Arctic Refuge--6th Update
06/01Biden Administration to Suspend Oil Leases in Arctic Refuge--5th Update
06/01Biden Administration Supports Oil, Mining Projects Backed by Trump -- Update
06/01Biden Administration Supports Oil, Mining Projects Backed by Trump
05/06Rio Tinto Shareholders Vote Against Former CEO Pay
05/06Rio Tinto Expects Decision on Pandemic-Delayed Winu Project by Year-End
More news
Duration : Period :
LME Zinc Cash Technical Analysis Chart | MarketScreener
Full-screen chart