February 12, 2019 / 11:41 AM / 6 months ago

METALS-Zinc hits two-week low on dollar rally, global growth woes

 (Recasts, updates prices, changes dateline, adds quote/details)
    By Naveen Thukral
    LONDON, Feb 12 (Reuters) - Zinc fell for a third session on
Tuesday, hitting its lowest in more than two weeks, as the
dollar held near a two-month high and investors remained
concerned about global economic growth.
    In wider markets, global equities rallied as investors grew
more optimistic about U.S.-China trade talks and cheered
Washington's deal to avoid another government shutdown, but this
was not enough to lift metals.            
    "The rational for higher (metals) prices right now is not
stacking up," said Bank of America-Merrill Lynch analyst Michael
Widmer.
    "There (has been) higher confidence that maybe if we get a
trade deal we'll get higher prices, if China data improves we'll
get higher prices. But realistically, for now, the U.S. is
slowing, Europe is going nowhere and China is finding it hard to
stimulate its economy." 
    He added, however, that zinc should find support at about
$2,400 to $2,500 a tonne because of tight stocks.
    Benchmark zinc         on the London Metal Exchange shot up
by nearly a fifth in the month to Feb. 5, when it touched a
seven-month peak of $2,810 a tonne, but has since slipped. It
traded down 0.4 percent in official midday rings at $2,634.50 a
tonne on Tuesday, having hit a low of $2,626.50.
    
    * ZINC STOCKS: Underpinning zinc, data showed LME
inventories of the metal MZNSTX-TOTAL eroded further to their
lowest since January 2008.
    * ZINC TECHNICALS: Zinc attracted additional selling on
Monday after it breached the 200-day moving average at
$2,662.51.
    * SPREADS: Cash zinc traded at a premium of $1 a tonne to
the three-month price, off a high of $125 in early December,
though Citi said the reduced tightness in the spreads was
lulling the market into "a false sense of looseness".  
    * DEMAND: "The seasonal demand pick up in the second quarter
has the potential to almost wipe out (zinc) exchange stocks. Our
short-term point price target remains $2,800, but by the end of
the year we expect zinc to trade down to $2,400," the bank said.
    * TRADE TALKS: U.S. Trade Representative Robert Lighthizer
arrived in the Chinese capital on Tuesday ahead of high-level
trade talks scheduled this week for the world's two largest
economies to hammer out a deal ahead of a March 1 deadline.
            
    * THYSSENKRUPP: German steel-to-elevators group Thyssenkrupp
          on Tuesday warned of a darkening economic backdrop,
including a weakening automotive market, signalling tough times
for its capital goods business ahead of a planned separation.
            
    * OTHER METALS: Copper         traded down 0.5 percent in
rings at $6,118, aluminium         traded down 0.7 percent at
$1,866, lead         traded up 0.1 percent at $2,048, nickel
        was last bid down 0.2 percent at $12,470 while tin
        was last bid down 0.4 percent at $20,950. 
    

    
 (Additional reporting by Naveen Thukral
Editing by David Goodman and Kirsten Donovan)
  
 
 
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