RALLY IN ZINC IS BASED ON INCORRECT FIGURES OF PRODUCTION

[vc_row][vc_column width="1/1"][vc_column_text]By Ibrahim Patel Mumbai:  At present not a single new major zinc mine being commissioned anywhere in the world and demand for this commodity increasing day by day. We believe that the zinc stock is heading towards deficit. This statement was made by Ivan Glsenberg, CEO of Glencore, and of the major global producers of Zinc while addressing shareholders of the company last week. According to a trade survey, the supply deficit during current year would be around 145300 ton. Investors are stampeding back into the LME zinc futures following Glsenberg's statement. Consequently, Uptrend witnessed in zinc. During last week, quarterly futures reached at the peak of $2400, which was under $2000 since a long time. However, several traders aren't ready to accept this story of supply crunch. They were frustrated frequently. They opine that the story of the supply tightness is always two, three, four years away. Thus, such traders say that it isn't conducive to adapt not long position. Though, Chinese fundamentals seemed to be supportive to zinc on the surface. Analysts says that supply in China has slowed down due to problems of environment and increase in production cost, which provides 30% of the total global zinc supply. Exactly at the same time Mine metals a research agency owned by the Chinese government has predicted that the demand for zinc would increase by 4.9% during the current year. But it is difficult to say anything officially as the statistical data of Chinese industries is very opaque. So it is difficult to predict that how much zinc stock lying in the Chinese warehouse or how much cut would be applied by the Chinese galvanized steel industry in the zinc coating while price would head northwards. However increase in the stock of Shanghais Futures Exchange during the current year means that ample inventories are lying there. Given this, traders say that rally in the price of LME benchmark futures may be driven by the financial speculators. However, LME stock is declining steadily since the beginning of the current year it has declined by 35% till date and remained at 239000 ton. These figures are rally inspiring for the market. during last week, backwardation between LME benchmark cash and futures was highest during the current year at as big as that of $33. This development suggest that there is a severe shortage of commodity in the market. On Wednesday, it was trading in a range of backward by $7.5 to Contango to $0.50. On Wednesday, three months futures crashed by 2% to be quoted $2301.50, which was the lowest price since 30th April. Now the LME has been publishing it American style commitment of trade report since last July. How real are these figures is a different question. A player, who plays futures on the figures of demand-supply stated that against the decrease of stock at LME during the current year, stock at the Shanghai Futures Exchange has increased by 111000 ton to be at 194505 ton. It suggests there isn't any real shortage of zinc in the market as the stock in one part of the world has decreased and in other country has increased.                                                                        [Courtesy - www.commoditydna.com]

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About Author Ibrahim Patel is well-experienced commodity & currency expert. He has writing experience in the field since 35 years. He is working in Sandesh Gujarati newspaper and also editor of www.commoditydna.com. He had vast experience in analysis of trends in comodity markets in Vyapar, a commercial newspaper from Mumbai.[/vc_column_text][/vc_column][/vc_row]