Available zinc stocks in London Metal Exchange (LME) approved warehouses have fallen dramatically, reaching a one-year low after significant cancellations by inventory holders. This decline, reported by LME data, reflects a 38% drop over just two days.
Key Highlights:
Inventory Decline:
Total notices for removal amounted to 94,525 metric tons on Monday and Tuesday, bringing the available zinc stocks down to 154,125 tons.
This marks the lowest level of available or on-warrant zinc stocks in a year.
Influence of Trafigura:
Commodity trader Trafigura Group has reportedly ordered thousands of tons of zinc to be withdrawn from LME warehouses, contributing to the price surge.
The movement of zinc has been linked to increased trading activity and price fluctuations.
Market Reactions:
The tightening of LME zinc stocks has prompted buying from commodity trading advisers, who leverage numerical models for trading decisions.
Producers have also been attracted to the market due to the changing inventory landscape.
Price Movement:
The LME benchmark three-month zinc contract rose by 1.4% to $3,118 per ton, reaching a four-week high of $3,149 earlier in the day.
Understanding Warrants:
A warrant serves as a legal document indicating ownership of inventories. Cancellations signal an intention to remove the metal but do not permanently take it out of circulation, as it can be re-warranted.