Zinc gains on China output cuts
Zinc has posted smart gains in both international and domestic markets over the last couple of trading sessions, buoyed by high energy prices and an expected cut in Chinese production.
By Deepa Krishnan, ET Bureau |
MUMBAI: Zinc has posted smart gains in both international and domestic markets over the last couple of trading sessions, buoyed by high energy prices and an expected cut in Chinese production. After rising by their 4% daily limit in the previous session on the London Metal Exchange, zinc futures closed higher at $2,025 per tonne on Friday, following reports that Chinese smelters were to cut production by 10%. On Monday, the prices remained unchanged at $2,025 a tonne, after touching a season���s high of $2,120 ��� its highest since May 29. Analysts said the prices could go up further to test the $2,160 levels.
On MCX, the prices rose by over 4% to Rs 90.40 per kg, and the analysts said the metal could test Rs 91 per kg. China���s small and medium-sized zinc smelters agreed on Saturday to cut production immediately to lift local prices. The deal came just two days after China���s large aluminium smelters decided to cut output by 5-10% as electricity shortages threatened to push the country into its worst summer power crisis since 2004. The production cuts are expected to run from July to September, said industry sources.
Industry sources said volatile prices are unlikely to affect the strong demand for zinc in the domestic market. ���The demand for steel, and other metals would be high as the number of infrastructure projects are increasing,��� said a trader. However, there is concern over fund flows into infrastructure projects due to the possibility of early polls, traders said.
India���s largest producer of zinc, Hindustan Zinc, has already raised prices by 6% to match the global price rise. According to Surendra Mardia, president of the Bombay Metal Exchange, the current rise in zinc prices would not affect the domestic players. ���International zinc prices were ruling at current levels before dipping to $1,800 recently. Traders were yet to factor in that decline, so they are not affected with the recent rise,��� said the trader. He added that in any case, the demand is good for zinc, which is mainly used to increase the longevity of steel.
In the absence of any price-sensitive cues, traders would be closely watching currency markets for direction, analysts said. They said they were watching the movement of the dollar, which continued to hover near record lows against the euro after the US Treasury and Federal Reserve launched an array of measures to restore investor confidence in embattled US mortgage lenders Fannie Mae and Freddie Mac.
On MCX, the prices rose by over 4% to Rs 90.40 per kg, and the analysts said the metal could test Rs 91 per kg. China���s small and medium-sized zinc smelters agreed on Saturday to cut production immediately to lift local prices. The deal came just two days after China���s large aluminium smelters decided to cut output by 5-10% as electricity shortages threatened to push the country into its worst summer power crisis since 2004. The production cuts are expected to run from July to September, said industry sources.
Industry sources said volatile prices are unlikely to affect the strong demand for zinc in the domestic market. ���The demand for steel, and other metals would be high as the number of infrastructure projects are increasing,��� said a trader. However, there is concern over fund flows into infrastructure projects due to the possibility of early polls, traders said.
India���s largest producer of zinc, Hindustan Zinc, has already raised prices by 6% to match the global price rise. According to Surendra Mardia, president of the Bombay Metal Exchange, the current rise in zinc prices would not affect the domestic players. ���International zinc prices were ruling at current levels before dipping to $1,800 recently. Traders were yet to factor in that decline, so they are not affected with the recent rise,��� said the trader. He added that in any case, the demand is good for zinc, which is mainly used to increase the longevity of steel.
In the absence of any price-sensitive cues, traders would be closely watching currency markets for direction, analysts said. They said they were watching the movement of the dollar, which continued to hover near record lows against the euro after the US Treasury and Federal Reserve launched an array of measures to restore investor confidence in embattled US mortgage lenders Fannie Mae and Freddie Mac.
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