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Antaike Analysis: Where Will Zinc Price Go after the Significant Rise?

2021-02-23 16:54:21

Beijing, Feb. 23 (Antaike)--Commodity prices embraced significant rises at the start of “bull”year, and SHFE copper price recorded the maximum growth on Feb. 22, and zinc price also inched up greatly.


LME zinc price increased 3.0% and stood at $2,800/t during the Spring Festival holiday, and SHFE also rose to 21,000 yuan/t after the holiday. Market was all hot, and copper was especially strong. LME zinc price reached $2,950/t and SHFE zinc price also stood at 22,000 yuan/t, very close to the highest of 22,315 yuan/t achieved in December 2020.


Inflation was the major driving force to the largely rising nonferrous metals prices. U.S. Fed launched quantitative easing and covid-19 vaccine was also in vaccination, which meant demand would recover strongly under the expectation of economy rebounding. It seems that zinc price can easily break the previously high, but what about the market fundamental?


On supply side, the tight concentrate supply was eased in a short term and in a long running, supply will be loose. Concentrate supply was tight throughout the winter, which affected refineries’ production to some extent. Domestic high altitude mines will resume production gradually as weather gets warmer, so do overseas mines as they get rid of the covid-19, thus concentrate market will be in surplus again in the second half of 2021. Consumption will depend more on foreign nations after they successfully control the covid-19, and the infrastructure plans in U.S. also intensify this expectation. However, the rising consumption might be offset by higher supply in a long term, and support from market fundamental is strong in a short term but weaker in a long running.


Commodity market is still in a bull market, and it seems LME zinc price of $3,200/t and SHFE zinc price of 24,500 yuan/t are easily to reach. But if the expectation of inflation rises, U.S. Fed may raise interest rate in advance, and support from market fundamental will also turn weak.


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