It’s a good time to accumulate zinc
Base metal prices have been in a downtrend since 2011 due to slowing consumption –– especially from China, higher stocks and deteriorating global demand.
Updated:
By Viral Shah
Base metal prices have been in a downtrend since 2011 due to slowing consumption –– especially from China, higher stocks and deteriorating global demand. Prices have touched multi-year lows on LME at $1,487 after touching a high of $2,404 in 2015. Year to date, zinc prices have fallen by 35%.
The cure to lower prices is lower prices & the current low prices are forcing some large metal trading companies and mines to shut production of zinc. Already companies like Glencore have announced a closure of mines resulting in 50,0000 tonne of supply cut in 2016. Smelters in China have announced production cuts. Based on demand-supply scenario for zinc, it seems like a good time to start accumulating long positions in zinc on every fall. Current zinc prices on MCX for the Dec contract are trading at Rs 100-104 per kg. Contract value for 5 tonne is Rs 52,0000. By paying a margin of 5% (app), clients can take a long position in the market for a potential upside of 5%-10% in zinc prices by Dec-Jan. Zinc has many industrial applications in the power and automotive sector. Along with lead, it is one of the smaller metals in terms of global production –-which is around 13 million tonne.
(The writer is head, Institutional Business, Geofin Comtrade Ltd)
Base metal prices have been in a downtrend since 2011 due to slowing consumption –– especially from China, higher stocks and deteriorating global demand. Prices have touched multi-year lows on LME at $1,487 after touching a high of $2,404 in 2015. Year to date, zinc prices have fallen by 35%.
The cure to lower prices is lower prices & the current low prices are forcing some large metal trading companies and mines to shut production of zinc. Already companies like Glencore have announced a closure of mines resulting in 50,0000 tonne of supply cut in 2016. Smelters in China have announced production cuts. Based on demand-supply scenario for zinc, it seems like a good time to start accumulating long positions in zinc on every fall. Current zinc prices on MCX for the Dec contract are trading at Rs 100-104 per kg. Contract value for 5 tonne is Rs 52,0000. By paying a margin of 5% (app), clients can take a long position in the market for a potential upside of 5%-10% in zinc prices by Dec-Jan. Zinc has many industrial applications in the power and automotive sector. Along with lead, it is one of the smaller metals in terms of global production –-which is around 13 million tonne.
(The writer is head, Institutional Business, Geofin Comtrade Ltd)
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