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The most-traded May zinc contract stood at 22,035 yuan ($3,282) per tonne as at 9.55am Shanghai time, up by 1.6% or 340 yuan per tonne from a close of 21,695 yuan per tonne on Monday.
“Investors largely shrugged off concerns about weaker economic growth, and a weaker USD helped boost sentiment in commodity markets,” Cherelle Murphy, analyst at Australia and New Zealand Banking Group (ANZ), said in a morning note on Tuesday.
The dollar index was at 96.51 as at 10.05am Shanghai time, down from 96.62 at roughly the same time on Monday and down from a recent high of 96.81 on March 22.
On the supply side, zinc has also benefited from last week’s decline in inventories at SHFE-approved warehouses as well as expectations of possible supply disruptions following floods in the Australian state of Queensland, Fastmarkets research analyst Andy Farida noted.
“A decline in SHFE stocks in the week to March 22 has also supported the zinc complex. A total of 8,064 tonnes was removed and net holding dipped to 115,974 tonnes,” Farida said.
“Recent disruptions from a flood in Queensland could restrict the supply of mined zinc ore and concentrate to smelters. While we learnt that zinc smelters’ operations remain unaffected in the short term due to additional feed from the New Century zinc project and Vedanta’s Gamsberg, if the transport issue drags on for another three months, supply could deteriorate,” he added.
More broadly, forthcoming trade talks between China and the US – the world’s two largest economies – also buoyed overall market sentiment to give most of the base metals on the SHFE a boost on Tuesday morning.
A US delegation, led by trade representative Robert Lighthizer and treasury secretary Steven Mnuchin, will arrive in Beijing on Thursday for the latest round of trade talks with Chinese officials.
Other highlights – Although SHFE base metals prices were broadly up this morning, tin bucked the trend; the most-traded May tin contract on the SHFE edged down by 180 yuan per tonne or 0.1% to 146,720 yuan per tonne as at 9.55am Shanghai time. – Deliverable tin stocks at SHFE warehouses remain vastly elevated compared with year-ago volumes; SHFE tin stocks rose by 30 tonnes to 8,418 tonnes in the week ended March 22, which is up 80.3% or 3,751 tonnes from 4,667 tonnes a year earlier. – In European data on Monday, the German IFO business climate index for March came in better than expected, snapping a recent run of weak data from the continent and relieving markets of economic growth worries. The index rose to 99.6 this month from an upwardly revised 98.7 in February.