In India, most investors usually throw the towel when it comes of investing in zinc commodity. It is because the investors who are looking to gain exposure to zinc have no option to invest in zinc commodity. Although digital participants who are seeing to trade zinc in commodities have the option of looking at zinc futures contracts. Base metals such as zinc, copper, lead, aluminum, and nickel are commodities which trade in commodity market across the globe. Unlike precious metals, base metals are far less expensive and widely used in industrial and commercial applications.
Zinc is one of the base metals which are more abundant in nature, easier to mine, and widely used for construction & manufacturing. A few years back Gold and other precious metals were quite popular and getting all the attention of media. But, as the economy continues to rise and fluctuations in commodity market increases, base & industrial metals are now as popular as Gold & Silver ever were. Now-a-days base metals become important commodities in sectors such as technology and construction. Especially Zinc. Whether you are looking to diversify your equity loaded portfolio with commodities or trade in zinc futures, one thing you need to consider in both situations is to understand:
What drives the price of zinc commodity?
Since it is forth most commonly used metal after iron, aluminum, and copper, it is important to understand what factors make zinc prices to fluctuate.
Factors Affecting Zinc Prices in Commodity Market
Futures traders who are trading zinc in commodities through zinc futures contracts must familiarize with the domestic and global factors of fluctuation in future zinc prices. The trades who trade zinc futures make profit and loss based on the price differences of the zinc futures contract which they bought or sold it. So, to minimize the risks or trading zinc and maximize the returns, you need to know what factors are largely affecting zinc prices.
Supply & Demand
Stating the obvious but “supply & demand” is a very powerful factor in fluctuation in zinc as well as other commodities such as natural gas, copper, gold, iron, crude, and so on. So, you need to be updated on the global and domestic stats of zinc commodity such as production and consumption.
For instance, India’s refined zinc production during fiscal year 2017-18 stood at 7,91,460 MT however in fiscal year 2016-17 it was 6,71,988 MT. It indicates that the production of zinc has increased compared to previous year and it is continued to do so, seeing the need of this base metal in industrial and commercial applications. Besides, the production of zinc in Indian is more than stable. India has an excellent world class open-pit zinc mine in Rajasthan which produces the world-class zinc. Not only it used in domestic consumption but also exports overseas.
Apart from this the main producers of zinc are Hindustan Zinc Limited (HZL) and Edayar Zinc Ltd. If we talk about the global market then in year 2017 the world zinc production was near 13.7 MMT which almost same as of production of zinc in year 2016.
Rep. of Korea, Canada, Belgium, Australia, and Spain were the top exporters in 2017.
Economic events play a major role in the fluctuation of zinc prices. As you know that there is a correlation in commodity prices and economy so during the times of inflation and recession, the commodity prices fluctuates which affects the commodity market. Also other events such as unexpected closures of mine or plant can directly affect the supply of zinc in the market. Apart from this, the construction of new production facilities and industry restructuring also affect the global zinc prices. Even government’s trade policies, penalties, and implementations of taxes also affect the zinc supply and ultimately zinc prices in the commodity market.
Just like the cost of a scrap metal can impact the price of secondary production similarly, the price of zinc depends upon the cost of required supplies such as coal, electricity, and crude oil, needed to mine and refine zinc.
So, input prices matters a lot!
Hope, this article helped you in a way you expected it to be. If you have any query or would like to suggest something then don’t forget to mention in the comment section below.