Global zinc prices are seen range-bound with slight positive bias in January due to the production cuts and rise in Chinese state reserves, analysts said. China is one of the world's largest producer and consumer of most base metals.
“Most Chinese companies announced production cuts in November, the effect of which is being seen now and could be witnessed through January,” said Prakash Prabhu, analyst from Greenback Commodities.
Zhuzhou of China has slashed zinc production by a third at its 400,000 tonnes facilities since November, and the firm plans to maintain the cut through the first quarter of 2009. Also, China's top lead producer, Yuguang gold and lead, has shut its 100,000 tonnes per annum zinc facility since November.
Reports say Xstrata Plc, the world's fourth-biggest nickel producer, also plans to cut zinc output at an Australian mine by 20 per cent. The three-month zinc contract on the London Metal Exchange was at $1,155.75 per tonne, up 0.41 per cent from Tuesday's close.
Overseas zinc prices have collapsed over 60 per cent to the current levels from around $2,900 noted early this year. Zinc is expected to find support at $1,100 per tonne and face resistance at $1,200 in January, said Prabhu. Domestic prices of zinc are likely to move in tandem with the global trend, but consumption of the metal is likely to remain subdued in January, marketmen said.