Traders weigh China demand post-Lunar New Year, zinc falls

With traders evaluating demand forecasts in China, the largest consumer, after the Lunar New Year break, zinc saw a loss of -1.71%, closing at 212.05. Reviving the housing market and stimulating loan demand are the overarching goals of China’s attempt to lower the benchmark reference rate for mortgages. Zinc concentrate production is planned to commence in the third quarter of 2024, although difficulties in the market still exist, most notably the postponement of the commencement of operations at Russia’s new Ozernoye mine, which is expected to result in a full-capacity ramp-up in 2025.

Significant inflows into LME warehouses are thought to be the cause of the expanding discount for cash throughout the zinc contract’s three-month period, which reached four-month highs. As the regular winter slump ends, construction activity is expected to pick up in China in the upcoming weeks. After falling over the previous ten days, zinc stockpiles have surged, rising 14% on the London Metal Exchange (LME) to a one-month high of 216,675 metric tonnes.

This comes after an 18% decrease in LME stocks from the end of December to the end of January. Zinc stockpiles on the Shanghai Futures Exchange rose by 21% in just one week, in part because of restocking ahead of China’s Lunar New Year holiday.

Technically speaking, there has been a long liquidation of the zinc market as shown by the 18.09% decline in open interest that ended at 2232 and the -3.7 rupee price decline. Zinc has a determined support of 210.8, and if it is violated, it could test at 209.4. Resistance on the upside is seen at 214.3, and a breakthrough there might result in a test of 216.4.

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