Zinc Turned Upside Down as Prices Tank and Stockpiles Surge
By Mark Burton
5. March 2018, 16:04 MEZ Updated on 5. März 2018, 20:03 MEZ
After rallying in 2017, zinc prices are down so far this year
Prices fell further after stockpiles rose the most since 1989
The zinc market is making a U-turn.
The market shot up over the past two years, but is now in retreat. Prices have tumbled 8 percent since a peak in mid-February. On Monday, the losses deepened after data from the London Metal Exchange showed the biggest increase in inventories in almost three decades.
Click here for more on the jump in zinc stockpiles
Here’s why the delivery matters for the global zinc market:
It’s the Bull Case
Declining inventories have been a big factor driving up prices. Zinc jumped more than 60 percent over the past five years as LME stockpiles shrunk by more than 80 percent. The main question on traders’ minds is now whether stockpiles will rise further.
Zinc prices fell 1.8 percent to settle at $3,296 a metric ton as of 5:51 p.m. in London.
Funds have already been paring bullish positions in zinc. In the immediate term, prices should find some support at around $3,300 a ton, analysts at Marex Spectron said in an emailed note.
Spreads Are Starting to Relax
The zinc market has been extremely tight in recent months, meaning that it’s difficult for suppliers to access metal, and has frequently been in backwardation, a condition when spot contracts trade above futures.
There are signs the market may be finally loosening. Last week, cash contracts traded at a discount to March futures for the first time this year. The spread weakened further following the delivery on Monday.
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