On August 26, LME three-month zinc rose to around $3,950/mt during intraday trading, its highest level in nearly four years, moving closer to the key $4,000/mt threshold. The rally was supported by a combination of regional supply imbalances in overseas refined zinc markets, a tight nearby structure and increased fund participation.
On August 25, the LME cash-to-three-month zinc backwardation stood at approximately $134/mt, while the Cash–September backwardation was around $78.50/mt, indicating continued tightness at the front of the curve. LME zinc inventories stood at approximately 95,100 mt, down 20.7% from the end of June, while warrant holdings remained highly concentrated. Around 17,000 mt of zinc has recently been delivered into LME warehouses, approximately two-thirds of which entered warehouses in Hong Kong. However, with the Chinese export arbitrage window remaining only marginally open, the additional deliveries have yet to materially ease the tight nearby structure in the London market.
Fund positioning has further increased zinc prices’ sensitivity to changes in inventories and time spreads. Aggregate long positions held by investment funds in LME zinc have exceeded 110,000 lots, indicating active bullish participation. However, position concentration data have yet to show clear dominance by any single long holder. In the short term, LME zinc may continue to test the $4,000/mt level. Key factors to monitor include the SHFE/LME ratio, Chinese refined zinc exports, the pace of deliveries into LME warehouses, and changes in LME position and warrant concentration.
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