MCX Zinc market under short covering
Commodity Online | August 30 2016
UPDATED 10:55:57 IST

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Zinc on MCX settled up 0.19% at 156.05 as support seen from Rupee weakness while on Zinc prices on LME fell by 1 percent on profit taking after it looked set to lock in a third month of gains. Traders are cautious after the update that Glencore Plc’s decision to cut zinc output to fight a rout in prices last year has been vindicated as the metal has rallied in 2016, according to Morgan Stanley, which held out the possibility that the commodity trader may order restarts. “It turns out, cutting/waiting was a good plan,” Morgan Stanley said in a note, which contained the heading “Glencore, vindicated.” The metal “may be supported/lifted, if China’s steel-production rate remains at around 800 million tons per year into 2017.

Conversely, the most likely short-term price cap for zinc is the reactivation of Glencore’s dormant mining capability,” it said. Zinc has led gains in metals this year after the shutdown of depleted mines coupled with Glencore’s cutbacks. Chief Executive Officer Ivan Glasenberg has repeatedly argued the case for miners not producing materials into oversupplied markets, saying in May that volume growth can’t be an end in itself. Morgan Stanley said zinc is its top commodity pick, while Goldman Sachs Group has dubbed it the “bullish exception” among metals. “We’re zinc bulls,” Morgan Stanley said. “But its 2016 price performance has surprised even us.

Any upside from here depends on China’s steel production rate and Glencore’s willingness to re-fire some of its mine supply.” Technically market is under short covering as market has witnessed drop in open interest by -5.07% to settled at 9784, now Zinc is getting support at 155.6 and below same could see a test of 155.2 level, and resistance is now likely to be seen at 156.4, a move above could see prices testing 156.8.

Trading Ideas:
--Zinc trading range for the day is 155.2-156.8.
--Zinc prices ended with gains as speculators bid up metals with supply concerns.
--Profits earned by China's industrial firms grew at their fastest pace in four months in July, aided by a pick-up in sales and reduced costs.
--Zinc daily stocks at Shanghai exchange came up by 1106 tonnes.

Courtesy: Kedia Commodities