Zinc prices may remain weak over the next few days on sluggish demand from the steel industry amid increasing world supply, despite reports of a production-cut of 20% to 30% announced by the two zinc manufacturing giants in China. MCX November contract prices fell by nearly 34% to trade at Rs 57.50 per kg on Monday from Rs 81.50 per kg quoted on September 1, 2008.
On the London Metal Exchange (LME), zinc cash prices also declined by 14% to trade at $1,120 per tonne on Monday from the average price of $1,302 a tonne in October. A strengthening US dollar and lack of funds in the global financial market have been weighing down on prices.
The liquidity crunch has been acting as a further constraint on demand as it has restricted the access of funds to metal producers and consumers, an analyst said. The global surplus in the zinc market has widened to 1.12 lakh tonne in the first nine months (January-September) of 2008 from 1.08 lakh tonne in the January-August period, according to the latest report of International Lead and Zinc Study Group (ILZSG).
Zinc prices on the London market have declined substantially by over 50% this year, owing to poor demand from zinc-consuming nations. Prices declined mainly due to the result of increasing world supply associated with the start of new mines and refineries.