Zinc continued its downward slide last week as it hit a 5-year low last Monday due to fears about rising stocks and falling demand in, you guessed it: China.
The base metal fell by its maximum daily limit of 5% in trading on the Shanghai Futures Exchange as a result, reported the Financial Times. The rising stocks can be placed at London Metal Exchange warehouses in New Orleans, which climbed nearly 60% over the past month, showcasing just how much zinc could be unloaded in the market.
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“The recent increase in LME inventory, particularly in New Orleans, appears to have drawn the market’s attention to just how much zinc is sloshing around,” Leon Westgate, an analyst at ICBC Standard Bank in London, told the news source.
This increase in New Orleans inventory, some believe, can be attributed to Glencore liquidating its stocks after the company announced it will reduce its working capital by $1.5 billion over the next year.
From Bulls to Bears
Zinc had some of the strongest fundamentals to begin 2015, signaling it as one of the strongest performers of any metal. However, the remainder of this year has not been kind to zinc as it is now the second-worst performer behind only nickel.
As we reported earlier, there is simply more zinc out there than we previously thought. The combination of a rise in stocks and drop in prices, plus the Glencore situation, have investors wary that zinc inventory is much more plentiful than originally believed.
You can find a more in-depth zinc price forecast and outlook in our brand new Monthly Metal Buying Outlook report. For a short- and long-term buying strategy with specific price thresholds: