Zinc movement indicates bullish trend

Zinc made a new high of Rs109/kg for the Year in the month of October, on expectations of global economy recovery and primarily as a result of the large number of cutbacks, closures and start-up delays of production units announced over the past few months.

After having taken into account the recent closure of the refineries at Datteln in Germany, Balkhash in Kazakhstan and Copsa Mica in Romania, as well as production cuts in Belgium, Brazil, Bulgaria, Netherlands, United States and a number of other countries, it is expected that global refined zinc metal output will fall by 4% to 11.18 million tonnes.

Belgium's Nyrstar SA, the world's biggest producer of zinc, said that demand for the metal in the West is showing signs of picking up and the downside potential for prices looks limited. Furthermore, global usage of refined zinc metal is forecast to decline by 4.9% to 10.92 million tonnes, the largest reduction since 1975.

In China, a combination of increased spending on infrastructure related projects and purchases of refined zinc metal by some provincial governments is expected to positively influence apparent usage and a rise of 4.6% is predicted. In technical charts, Zinc prices are seen approaching crucial resistance barrier and some profit booking in the near future seems imminent.

That said, the sharp rise seen during the second half of October does have bullish implications. However prices need to trade past Rs.112-114/kg mark to sustain the upward momentum. On the way down, the market needs to keep its head above the September high of Rs.97.15/kg to stay in the company of the bulls.

Courtesy: Religare Commodities

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