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Zinc prices fall on shrinking inventories as supplies tighten

Zinc prices dipped Wednesday after nearing a 3-month high reached last week on shrinking inventories and as smelter cuts in China lifted the market.

Inventories in LME-registered warehouses fell to 194,575 tonnes from more than 250,000 tonnes in August and are nearing 10-year lows. Stockpiles in Shanghai Futures Exchange storehouses at 29,204 tonnes are the smallest since 2007.

Production cutbacks at China’s zinc smelters in response to tighter environmental checks and weaker profits have been responsible for the tightened supply.

“There has been investments in zinc mining that are expected to come onto the market in 2019. That will shift the market balance. In the short term, prices could maintain these levels but in 2019 price pressures will build,” Casper Burgering explained in a monitored report.

On the London Metal Exchange, three-month zinc was last bid down 0.4 percent in official midday rings at $2,668, having hit $2,715, nearing last week’s three month high. The metal used to galvanise steel has surged 18 percent from August’s 22-month low of $2,283, with the demand for refined zinc expected to exceed supply by 322,000 tonnes this year and 72,000 tonnes in 2019, according to the International Lead and Zinc Study Group on Monday.

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“Zinc, along with nickel, has been the major beneficiary of ferrous moves. But it should run into major resistance between $2,728-52, the high from Oct 2,” said Marex Spectro, another analyst said.

China’s blue-chip index fell for a third consecutive day, but the main Shanghai Composite index rose as investors weighed government support for continued growth against the impact of the U.S.-China trade war.

Also, the premium of cash zinc over the three-month contract rose to $41.50; reversing recent falls signaling a lack of nearby supply.

Copper traded down 0.1 percent in rings at $6,283 a tonne, aluminium was last bid down 0.9 percent at $2,036, lead was last bid up 0.1 percent at $1,937, nickel was last bid down 1 percent at $12,890 while tin was last bid up 0.4 percent at $18,975.

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