Chinese Activity May Dampen Zinc Price Rally, Says Macquarie

Mineweb reported that according to Macquarie Commodities Research, the Chinese zinc market will not be tightening up any time soon.

Three main factors are behind the firm’s belief:

  1. Smelters are set to ramp up production.
  2. Galvanizers are sitting on increasing stockpiles.
  3. Construction industry demand “remains muted.”

As quoted in the market news:

While LME zinc prices have outperformed both copper and aluminum this year, Macquarie noted that Chinese zinc prices haven’t performed as well ‘and as a result the import arbitrage for zinc has been closed since late-2013. By end-February 2014 the import ‘loss’ for zinc was around $200-$300/t, which means that even the least costly of financing trades would need to yield 12-15% annualized interest to breakeven.’

‘This, coupled with increasing supply from domestic smelters should reduce Chinese import volumes in zinc even when demand recovers, which in turn, should cap LME zinc prices,’ said the analysts.

Click here to read the full Mineweb report.