Zinc Pulls Back from 4-Month High

Zinc futures fell to $2,830 per tonne from the four-month high of $2,880 touched on July 24th as markets assessed the outlook for galvanization demand in top consumer China. The Chinese government stepped-up its rhetoric that it will reduce capacity in key industries to prevent their oversupply and combat the producers’ deflationary spiral, with special attention to lower steel output. Consequently, the lower steel turnover reduced the outlook for galvanization, zinc’s main industrial use. This coincided with the uncertain outlook for factory demand as the country’s official PMI continued to point to a contraction for manufacturers. On the supply front, mined output from Teck Resources’ Red Dog Mine in Alaska, the largest mine in the world, which is nearing its depletion, dropped 20% annually to 145,300 tonnes in the first quarter of the year.