Commodity Radar: Zinc’s tight inventories bolster fundamentals; favourable charts hint at buying opportunity, says Religare analyst
Zinc futures fell 0.8% on MCX to Rs 302.35 as traders cut positions amid sluggish domestic demand, even as global zinc prices rose on tight supply and improving industrial activity.
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Zinc futures traded lower on the MCX on Tuesday as traders trimmed their positions on the back of weak domestic demand in the physical markets. The November futures fell 0.8% to hit the day’s low of Rs 302.35.
The lackluster domestic trade was despite a rally in zinc price in major international markets like the London Metal Exchange and Shanghai Futures Exchange (SHFE). The three-month zinc contracts on the LME were up 0.8% and were hovering around $3,081 a ton while those on the SHFE were trading around 22,675 CNY/Mt, up by 0.27%.
Commenting on the current trends, Ajit Mishra, Senior Vice President, Research at Religare Broking highlighted zinc’s strong fundamentals leading to the rebound in prices over the last couple of weeks.
“Global stocks / inventories are very low implying there’s little buffer if demand rises or supply is disrupted. Treatment charges (TCs) in China are dropping, which suggests concentrate is tight or smelters are less willing/able to process,” Mishra said, suggesting this as a sign of raw material shortage.
He also mentioned revival in the industrial demand for zinc.
Zinc, a base metal, is widely used in galvanizing steel, in construction, infrastructure, automotive so any rebound in those sectors help in supporting zinc prices.
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Technical view
Mishra said Zinc has shown a steady recovery after forming a base in the Rs 287-290/tonne range. MCX futures prices on the weekly chart remain above the key Exponential Moving Averages (EMA), signaling positive momentum ahead, he added.
Chart: Zinc Weekly
Trading strategy
Mishra suggests traders to consider initiating long positions in the Rs 299-301/tonne zone, with a stop loss at Rs 294/tonne and a target of Rs 310/tonne. This implies a 2.3% upside.
(Disclaimer: The recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of The Economic Times.)
