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Improved Demand Outlook: LME Zinc prices are trading near 2490 levels, driven by an improved demand outlook. This is partly due to expectations of additional stimulus measures in China to boost its economy, as China is the top buyer of .
Strong Chinese Demand: Recent data indicates that China imported 76,800 metric tons of zinc in July, marking the highest monthly import since April 2019. This surge in imports suggests renewed appetite for the metal in the Chinese market.
Domestic Production and Inventory: Despite increased domestic production of refined zinc in China, the Shanghai market has faced challenges due to dwindling inventory levels and constrained time spreads. These factors indicate persistent supply constraints.
Challenges for Small and Medium-Sized Mines: Small and medium-sized zinc mines, particularly in Europe and Australia, are grappling with profitability challenges. High operating costs and declining zinc prices have led to mine suspensions, such as Almina-Minas do Alentejo in Aljustrel, which is set to remain suspended until the second quarter of 2025.
Discount on Zinc: The discount on zinc for near-term delivery compared to the three-month contract on the London Metal Exchange (LME) has reached its highest level since March 2021. This indicates an ample immediate supply of zinc in the market.
LME Inventory Levels: Zinc inventories in LME-approved warehouses increased significantly by the end of August, reaching their highest level since February 2022 at 153,575 metric tons. However, they have since fallen to 138,400 tons.
Shanghai Futures Exchange: Stocks of zinc in warehouses monitored by the Shanghai Futures Exchange have doubled this year, reaching 46,579 tons. This suggests a growing supply of zinc in the Chinese market.
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