In the physical market, premiums into China and Southeast Asia have softened ahead of the Lunar New Year holiday. Premiums elsewhere are little changed.
Low seasonal demand and weak downstream demand continue to overhang galvanized steel prices. Weaken momentum in the global vehicles market is likely to act as a drag for steel consumption and, in turn, zinc usage.
Spot treatment charges for zinc concentrates reached a multi-year high of $210-240 per tonne cif China at the end of January while various new and restarted mine projects continue to boost mine production. The recently started Gamsberg and Century zinc mines will continue to ramp up during 2019. Glencore recently raised its 2019 production guidance; higher output is expected from Goldcorp's Peñasquito mine.
The latest commitment of trader (COT) data showed net length among LME investment funds increased by 6,713 lots in the week to January 25 - the 1,850-lot reduction in open shorts reinforced the solid 4,864-lot build in gross longs.
Zinc has rallied strongly since mid-January, bolstered by signs of continued structural tightness. But although positive sentiment remains intact, prices are starting to look somewhat overbought and would benefit from some consolidation in the short term.
All trades or trading strategies mentioned in the report are hypothetical, for illustration only and do not constitute trading recommendations.