I think the market might be looking pretty flat until after Chinese New Year - Jan 23. It would be a minor victory for zinc to head into 2012 with headline stocks under 750,000t, which is still possible but may not open. In the past zinc has gained more speculative interest when it's fallen into the 700-600,000t range.
But here's a couple things that may slow down this desired result in the short-term.
Points Against
16-Dec China SHFE (Shanghai) Zinc Stocks 374,174 Tons, Up 268 Tons On Week
China zinc prices have fallen 5.1% on weak demand
More zinc to flow into LME. In addition to the 20,225 tonnes that was delivered into London Metal Exchange-listed warehouses on Thursday December 8, there could be as much as a further 40,000 tonnes expected before the end of the year.
Points For
As demand slows, so does Chinese supply as many workers will be leaving for their hometown due to the Chinese New Year
Zinc Futures for 2013, 2014 indicate sell prices at 87c and 88c respectively. 12mths buys are almost 89c.
Warehouse manipulation appears to favour zinc higher prices at present - the movement of inventors from Spain to New Orleans is thought to be part of a bid to tighten European supply and protect premiums. Despite higher inflows the zinc market price may remain flat. See note below*
In the last 12 months alone, JP Morgan & Goldman Sachs have further extended their reach into the LME and establish a monopoloy over warehouse control. JP Morgan bought MF globals 5% share in the LME to become the LME's largest shareholder.
What's really interesting from the article above is this comment:
Single traders own large holdings of other metals. One trader holds as much as 90% of the exchange's aluminum stocks. In the nickel, zinc and aluminum alloy markets, single traders own between 50% and 80% of those metals, and one firm has 40%-50% of the LME's tin stockpiles.
KZL Price at posting:
29.0¢ Sentiment: Buy Disclosure: Held
