Zinc Prices Could Rally Next Week

Zinc Prices Could Rally Next Week

By
Leia Toovey
-
March 10, 2017 - 16:13 GMT
Zinc prices have run into resistance, but the rally could soon resume as a labor dispute could further tighten market fundamentals. Zinc prices took off in 2016, nearly doubling and reaching a multi-year high, as the closure of some large zinc mines dramatically tightened the metal’s supply chain. According to the International Lead and Zinc Study Group, the zinc market ended 2016 with a 286,000 metric ton deficit.
In 2016, zinc prices peaked in November at $2,985 a ton. They then ran into resistance but regrouped and in early February zinc pushed up to $2.980.50 per ton. While zinc is having difficulty scaling its recent peaks, support may be mounting for the metal to test its 2017, and perhaps even 2016 high.

One major building support factor is the three-week strike at Noranda Income Fund’s zinc processing facility in Quebec. This strike shows now signs of ending. The plant, located at Salaberry-de-Valleyfield in Quebec, is the biggest zinc processing facility in eastern North America. The plant’s 371 unionized workers walked off the job after the two sides could not agree on proposed pension plan changes in a new collective bargaining agreement. With the market already in a supply deficit, investors are keeping a close watch on this development as it could further tighten the supply chain and give prices reason to break resistance and scale higher.
Meanwhile, Shanghai Metals Market said it expects zinc prices to rise next week, climbing to $2,640-2,750 per ton, supported by a decline in inventories in Shanghai, Guangdong and Tianjin.
Looking at the demand side of the equation, zinc, an important component of some stainless steel products could see increased demand in the coming weeks amid the pick-up of construction activity in China