- Supply disruption fears outweigh current surplus signals
- Market vulnerable to long liquidation if sentiment weakens
Metal Intelligence Centre: The easing of Middle East tensions, followed by the Fed’s hawkish stance on rates, triggered the unwinding of bullish positioning. COT data show that over the last few weeks, bullish bets declined across all metals.
Zinc, however, has bucked the trend. Speculative buying in the metal accelerated in June and reached a series of record highs.
According to the latest London Metal Exchange (LME) COT report, after rising 31% over the past five weeks, zinc’s long positioning currently sits at the 100th percentile of data from January 2020 to date, i.e., at an all-time high.
In contrast, long positions in aluminium (on LME) and copper (on CME), which benefited directly from supply disruptions brought about by the Iran war, now stand at the 93% and 84% percentiles, respectively.
Zinc’s rally is being driven by worries about future output cuts, while the current physical market fundamentals do not warrant the rally.
The Gulf conflict disrupted the supply of Iranian zinc ores to China. Iran holds some of the world’s largest zinc reserves. This pulled down TCs and raised worries of potential output cuts by Chinese smelters. The fears intensified after major explosions and fires in May at Kazzinc in Kazakhstan and Nexa Resources in Peru.
ILZSG revised its forecast for zinc to a deficit of 19,000 t in 2026.
However, despite these concerns, the current fundamentals look mixed.
ILZSG data show a zinc surplus of 144,900 t from January to April, up 20% y-o-y.
LME zinc inventories have increased by 16% over the past six months.
These indicators suggest that while supply disruptions exist, the physical market is not tight enough to justify such aggressive long positioning.
This makes zinc vulnerable to profit-taking by longs, also known as long liquidation.
On charts, a break below $3,450 (3m) may pave the path for $3,200-3,300.
Note: This article has been published as part of a content partnership between MIC and BigMint.
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