Source: Economic Calendar

Zinc prices stabilized this week after hitting a nine-month high last week, helped by a broad recovery in commodity markets and improving supply/demand fundamentals within the zinc industry. This year, zinc has been one of the best performer among industrial metals.

Zinc prices have been buoyed from major changes to the supply chain as a number of large scale mines have shutdown and many other have cut production. It is estimated that about 10% of global zinc production has been taken offline. At the same time, according to the International Lead and Zinc Study Group, zinc demand will increase by 1% this year. That is slightly higher than the 0.7% increase it saw in 2015.

While the biggest factor driving zinc this year has been the change in the supply situation, the metal has been buying to the general rally that has impacted all of the base metals. Major driving factors included a retreating U.S. dollar, and the sentiment that the global economy, in particular China is improving. In their latest earnings conference, mega miner Teck Resources’ management voiced their support for the zinc market, saying that it is undergoing a major change and over the coming years the growth in demand will outpace the supply curtailments. If this is the case, we can expect a few years of positive price momentum for the industrial metal.

Zinc futures fell 0.4% on Wednesday to finish at $125.60 per ton. After the recent upswing in prices the commodity has entered overbought territory. Both the moving averages and technical indicators have zinc ranked as Sell. Monday’s sluggish reaction was due to a general subdued trading environment as traders awaited the conclusion of the Federal Reserve’s policy meeting. We now know that the outcome was that the Fed did not hike interest rates, as expected, but the Fed left the door open for a June rate hike.