Downside risk remains for zinc prices following robust growth in 2017

SHANGHAI, Jan 16 (SMM)? 1/4 ?Following a robust growth in 2017, zinc prices face downward pressures in light of accumulated inventories.

Inventories are expected to increase due to weak consumption even though domestic supply remained tight due to environmental concerns. Few trades were heard in the spot market last week during the off season, SMM learned.

Zinc became the leader among base metals in the past year with an annual growth of 22%. As of Jan 15, SHFE zinc broke 26,000 yuan/mt, setting a new, 10-year high.

LME zinc beat historical records since August 2007, with prices surging 32% last year and 11% since early December 2017.

Low inventories were driving prices. The closure of many large mines has also reduced LME inventory by 58% in the past 12 months.

Supply shortages are expected to continue as some mines in north China have suspended operations due to inclement weather. For January, zinc smelters are likely to operate at less than 80%. In December, zinc smelters operated at a rate of 78.4%, down 4.2 percentage points on a monthly basis.

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