Remote prospects of demand for Zinc in short term has resulted in the metal going into a contango from backwardation in June, earlier this year. The metal has been hard hit by the rising steel stockpiles and lack of demand. Enough doubt on Chinese buying and continued ailment of Eurozone due to debt crisis has invoked short term fear in metal traders.
The change of Zinc from backwardation to contango also occurred as traders entered into long term financing deals in order to save them from uncertainty in present juncture. This limited the selling in London forwards that would have been more cruelsome in the absence of such deals.
The LME three month Zinc forwards were in a backwardation of $ 6 per tonne in mid June, but from there on the cash prices slipped sharply and Zinc is now in contango of $ 32 per tonne as of 8 October 2012. Since Mid August gap between cash and forwards have widened from $ 20 per tonne. The inventories of LME Zinc have increased by 21% in 2012 to 996225 tonnes. LME Zinc forwards were trading at $ 2042 per tonne on Monday, 8 October 2012, compared to $ 2010 per tonne in cash markets.
The major beneficiary in all this ambiguity has been domestic Zinc prices. The fall in Rupee has limited the blow on Zinc this year. Earlier in the year, lack of policy inaction by the UPA government led Rupee to weaken towards 57 against the Dollar. The sharp decline in Rupee made prices of Indian metals dearer for exports supporting the metal. Indian Zinc futures have increased by 7.4% this year to Rs 106.3 per kg. However from September profit booking and strength in Rupee has declined this metal from top of Rs 112.7 per kg in September 2012.
0 comments:
Post a Comment