LONDON: Zinc prices on Wednesday fell to a seven-week low on expectations that a supply crunch will ease.
Benchmark zinc on the London Metal Exchange (LME) closed down 1.8 percent at $2,455 a tonne after touching $2,445, the lowest since Sept. 21.
"Smelter margins in China are picking up and the expectation is that production is set to trend higher into year-end," said Deutsche Bank analyst Nick Snowdon.
"There has been a big build in (zinc) concentrate stocks (in China) in the last quarter or so ... with treatment charges picking up and prices stabilising there's a clear incentive for smelters to ramp up output," he said.
Prices of zinc, used to galvanise steel, fell 26 percent over June-August but have recovered from August's low of $2,283. China is the biggest producer and consumer of zinc.
ZINC STOCKS: Headline inventories in the LME warehouse system continue to fall. At 134,750 tonnes they are close to a 10-year low of 131,775 tonnes reached in March.
SPREAD: The premium for cash zinc over the three-month contract at $47.50 has eased from highs around $60 in late October, but signals that shortages of nearby supply remain.
DEFICIT: The roughly 13.5 million tonne global zinc market had a deficit of 292,000 tonnes in the first eight months of the year, the International Lead and Zinc Study Group (ILZSG) said.
DOLLAR: Providing some support to metals prices was the dollar, which weakened after gains by the Democrats in US elections cast doubt on further tax cuts. A lower dollar makes metals cheaper for buyers with other currencies.
CHINA: Despite fears that a US-China trade dispute will undermine China's economy, exports from the country are expected to have expanded at a healthy clip in October as businesses frontal orders before higher US tariffs set in at the turn of the year, a Reuters poll showed.
YUAN: In a sign that authorities may be stepping up interventions to keep the yuan from weakening, China's foreign exchange reserves fell more than expected to an 18-month low in October.
CHINA ALUMINA: China's exports of aluminium raw material alumina last month were roughly equal to September's bumper volumes, the president of Aluminium Corp of China.
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