Zinc jumps over Chinese production cut

A few weeks back, it was Glencore cutting 500,000 tons of zinc production globally, which is almost third of its overall production. Today, Chinese producers just followed up.

Chinese smelters in a joint statement, announced that current low price of zinc doesn't reflect fundamentals and causing troubles for businesses. According to the statement, smelters will take 500,000 tons offline next year.

Zinc is rallying on the news, up more than 5% and trading around $1607/ton in London Metal Exchange. From yesterdays low, Zinc is up almost 7.5%.

However, before today's jump, prices were at lowest since 2009. So the big question is will it last-this rally?

Last time Glencore cut output price jumped more than 10%, however euphoria soon got over with and Zinc as mentioned above dropped to new low since 2008/09 crisis.

Sustenance is less likely 

• Steel prices are still dropping due to lacklustre demand and zinc is most used to galvanize steel.
• China produced 5 million tons of Zinc last year, so 500,000 tons is just about 10% of Chinese production and 3.5% of Global.

Nevertheless, these production cut will contribute to price in the longer term, when demand recovers.