FxWirePro: Zinc price touches highest in decade; further rise likely

The price of zinc, which is largely used for steel galvanizing has jumped to the highest level since November 2007, when it crossed $3000 per ton in London Metal Exchange yesterday. After rising around 4 percent yesterday, the metal moved higher to trade around $3150 per ton today; though the gains were not sustained.

Zinc is riding on speculations that current nationalism would drive greater demand for steel and galvanizing. A supply crunch is also contributing to the rise along with China’s decision to review scrap imports. Though currently, China is reviewing scrap imports of copper, there is an ongoing speculation that the probe might extend to other metals.

It can be seen in the chart that Zinc has broken an important congestion area that has been in place since last December. After a false breakout in June to the downside, the Zinc price has increased by more than 27 percent and we expect the rally to continue further. We expect the price of Zinc to reach as high as $3500 per ton and momentum might even push the price to as high as $3650 per ton.