I think we have to face reality Muzza and we might be seeing zinc settle to what will be fair value for the metal for the medium term.That is $1.50-$2/lb
But it could still go either way short term dependant on just what the supply side does in combination with Chinas intentions with their stockpiles.
There may be some selling into any rally to $2/lb but if the supply side doesnt come to the party and LME stocks continue down then the Chinese may have no option but to retain their zinc for domestic purposes.
Id be watching closely with what happens with New Orleans from here on in.If the cancellations continue to bubble along and draws continue down towards 50Kt(we are at 60Kt now when taking into account cancelled warrants)then we are getting very short of reserves and I dont know that the Chinese would be even motivated to sell at $2/lb in these conditions.
Like I say watch New Orleans because if Singapore- Johor run out there arnt too many places for draws to come from if consumers get desperate.Rottedam being one but there aint much their either.
One other thing we should be considering is that this current zinc support may well be China buying TO stockpile,and if the case I dont think we would see them dumping such a stockpile bought at $1.60+ anytime soon ala the CTA funds etc might do.IF this is the case it is virtually rating the price of zinc IN THAT STOCKPILE as worth $1.60/lb.
The dynamics are still very complicated but as the funds continue to take a back seat and the fundamentals get tighter there can be only one reality for the price.It does indeed become a demand/supply situation without the foginess of funds mucking about with prices and contracts.
But then they may well jump back in.If so Imo zinc would go for a bit of a ride once again.But I would personally like to see some stability brought to the price at current levels with a continued slight strengthening towards $1.70/$1.80 rather than any fund motivated rollercoaster ride.
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