The Hindu Business Line : Zinc prices may turn bullish

Key Triggers
Zinc prices are expected to trade stronger and price outlook will turn bullish once the markets recover from the technical slump.
Nickel markets are expected to see stocks increasing in the near term as an expected de-stocking has begun in the markets.

Chennai June 10 Zinc prices are headed higher in the coming months, while nickel prices are likely to remain at lower levels.

According to an outlook on base metals for June, zinc prices are expected to turn bullish on the back of record fall in LME-monitored stocks and tight concentrate markets.

Substantial Positions

Zinc prices have got stuck in tight range as the markets have become uncertain about the fundamentals.

Increase in supply is expected to keep the prices underpinned during the later part of the year, while also keeping investors away from taking substantial positions in the market. However, the tight concentrates markets are the key trigger that has helped prices rally to new highs, the outlook by Kotak Commodities Services Ltd said.

The important factor that has supported the markets from the downside is the falling LME inventory levels. LME monitored warehouse stocks have declined to 2.4 days of consumption and now stand at 71,825 tonnes. Zinc stocks are expected to decline to less than 2 days of consumption and prices could touch highs seen last year.

Technical Slump

Zinc prices are expected to trade stronger and price outlook will turn bullish once the markets recover from the technical slump. The market would be looking for Chinese exports data as well. On the technical front, if $3,646 levels are broken on LME, a short-term bear trend is likely and a fall to $3,520 levels is possible. On the upper levels, there could be resistance at $3,882 levels and then at $3,922 levels. But chances are that prices could break all time highs in the coming months.

NICKEL

Nickel prices have corrected to significantly lower levels and the market is facing a shift in the demand and supply conditions due to change in the demand pattern.

The stainless steel industry, which uses nickel, has switched over to making series 200 and series 400 steel which uses lower amount of nickel.

Higher nickel prices have forced producers to use pig iron. The steel industry is also facing slowdown that could impact the demand dynamics. The bearish sentiment in the markets is supported by the demand destruction sentiment that has been complimented with substitution in the nickel markets.

Nickel markets are expected to see stocks increasing in the near term as an expected de-stocking has begun in the markets.

Nickel supply and demand balance is expected to turn to surplus in the current year based on large production trend in the supply side. Nickel prices are expected to go down till $40,900 levels and a breakout below that can crash the prices down to $38,800 levels. There is strong resistance at around $50,000 levels. Therefore, the prices are expected to remain at the lower levels.

Among other metals, copper could face resistance at $7,700 on LME and $8,090 levels are expected to remain difficult to be broken.

On breaking levels of $7,156, it can decline to $6, 800 levels. However, prices could bottom-out at around $7,250 to $7,330 levels and rebound for upside rally till $8,090 levels.

Higher Prices

For aluminium, the demand-side fundamentals are signifying higher prices levels. In the current month, prices could see support coming from the dominant long positions once the fund selling abates.

Aluminium could target $3,700 level for the LME 3 months contract, Kotak Commodity Services Ltd said.