Zinc is one of the most valuable base metal commodities which haven’t got a lot of attention in the market but still need to consider to trade zinc in commodities markets. The best way to trade in Zinc commodity is to go through the futures markets. The Multi Commodity Exchange (MCX) offers a futures contract for zinc. Zinc is an undervalued commodity which hasn’t come in front entirely but one can benefits in a lot of ways while trading zinc in the commodity market. If you are planning to trade in commodities then Zinc Futures is the way to do it but if you are planning to invest in then you should go for Zinc ETFs.
Overview: Zinc Commodity
Zinc is the fourth most widely used bluish-white lustrous metal in the world after, iron, aluminum, and copper. At most temperatures, it is hard and brittle in nature but becomes malleable between 100 degree Celsius and 150 degree Celsius. It is found in earth crust in zinc compound which refined into zinc metal. Normally, it is covered with a white coating on exposure to the atmosphere. Zinc is also the 24th most abundant element, with near 1.9 billion tonnes of recognized resources.
It was first formally discovered by Andreas Sigismund Marggraf in the year 1746. Andreas who was a German chemist first discovered it in the form of the element. However, the zinc has been in use long before the Andreas discovery. According to the journal Ancient Asia, miners were smelting zinc in India by the ninth century BC.
- It is not only one of the most commonly used based metal commodities but also used in galvanizing other metals to prevent corrosion. In fact, more than 50 percent of all metallic zinc produced today is to galvanize other metals such as iron where it works as an anti-corrosion agent.
- Zinc is also commonly used in hardware, electrical, and automotive industries where it is used to produce die castings. It plays a vital role in extending the life of vehicles, ships, buildings, and so on.
- Zinc is also popular in rubber, ceramics, paints, and agricultural areas where it used as a chemical compound.
Apart from this, it is quite a necessary element for plants, animals, and numerous microorganisms. However, the high level of zinc exposure could cause adverse health effects.
How to trade Zinc in Commodities?
If you are specifically looking to trade zinc in commodities then Zinc Futures is the way to gain exposures to the zinc prices. Zinc Futures is a commodity derivative instrument through which you can leverage bets on zinc prices. Zinc Futures is suitable for those traders who are planning to trade zinc in commodities. Through futures contract, one can trade in base metals such as zinc, aluminum, lead, copper, nickel and so on.
To do this, you must have an online commodity trading account where you can see all your profits and losses in your transactions. In trading zinc, you won’t be in possession of all physical goods of zinc instead all will trade on commodity exchanges such as multi-commodity exchange (MCX). If you wanna day trade zinc then you gotta close out all contracts or trades each day. Whatever the profit or loss you make, will be based on the price differences of the zinc futures contract which you bought or sold it.
MCX Zinc Futures Contracts
In India, one can trade in Zinc and Zinc mini instruments of base metal with MCX Zinc Futures Contracts. The trading unit of Zinc and Zinc mini in futures is 5MT and 1MT respectively. The Zinc Futures Contracts are available as per the Contract Launch Calendar. On futures exchanges, the price of Zinc fluctuates in 5 paise (0.05 rupees) increments. This increment is called “tick” which is the smallest movement a futures contract can make. So, when you trade zinc futures, how many ticks the price moves away from the entry price determines your net profit or loss.
The amount you need in your commodity trading account to trade zinc futures in commodities depends on your commodity broker. Since you will be trading in zinc futures so you need to close out your positions before the expiry.
A zinc futures contract is market-based risk management financial instrument offered on the MCX platform which is used by the stakeholders of the zinc market consisting producers, marketers, processors, and SMEs to gain from the fluctuation in zinc prices.
Factors Affecting Zinc Prices
- In India, the Zinc prices are fixed based on the rates that rule in INR-USD exchange rates and international spot market.
- Zinc prices are affected a lot by economic events such as the national industrial growth, global financial crisis, recession, and inflation etc. Even the geopolitical events heavily influenced zinc prices and cause major changes.
- “Demand and Supply” is one of the factors which drive the prices of zinc. Besides, as time, society develops, which lead to higher zinc demand based on the current economic position.
- If anything restricts the supply of material flow, it could hugely affect the prices of zinc. The trade policies are taken by the government (implementation or suspension of taxes, quotas, and penalties) also influence the zinc prices heavily.
If you are planning to trade zinc in commodities then you should consider these factors and make zinc trading strategy accordingly.
Final Thoughts: –
India’s refined zinc production during FY2016-17 was 6,71,988 MT however in FY2017-18 stood at 7,91,460 MT. It clearly indicates that the Indian mines are producing world-class zinc which not only used in domestic consumption and country’s exports.
There are several benefits of trading and investing in commodities especially in zinc commodity. With the future growth and demand of this base metal, one can assure huge returns in the future. Even if you are investing in this commodity, you can provide protection to your portfolio from short-term fluctuations in zinc prices. Besides, it is recommending keeping some commodity stocks in the heavily-loaded equity portfolio.
Hope, this article of “How to trade in Commodities?” helped you in a way you expected it to be. If you have any query or would like to add something then doesn’t forget to mention in the comment section below.
Note: All information & data provided in this article is for the educational purpose as well as to give general information on the finance & economy, not to provide any professional advice or service. Views & opinions are not biased against the company and do not affect any official policy or any other agency, an organization within the content.