Don't Bank on Chinese Smelter Cuts to Boost Zinc Price

Last week, Chinese zinc smelters announced plans to reduce their output by 500,000 tonnes in 2016 in light of poor zinc prices. However, according to Reuters, the cuts “will do little to tighten next year’s global supply-demand balance in refined metal.” That’s because zinc production cuts from miners would have forced the smelters to lower their output anyway.
As quoted in the market news:

On top of that, hard-hit prices will fail to get much of a lasting boost in coming months due to a glut of world inventories, although there may be spikes of short-covering, analysts and investors said.
Zinc is one of a clutch of industrial metals including bellwether copper which have hit multi-year lows this month, weighed down by a surplus of supplies and a fall-off in demand from top customer China.
Benchmark zinc prices found respite on Friday following the announcement of plans by top Chinese zinc smelters to slash 500 000 tonnes of production next year.
But that is a only a small proportion of global consumption estimated at between 13-million to 14-million tonnes this year and the uplift was mainly due to panicky bears closing short positions – bets on lower prices – but this soon ran out of steam and prices on Monday came close to last week’s six-year low.

Click here to read the full Reuters report.