Chengdu, a key hub for metallurgy and building materials production, entered a complete lockdown late last Thursday, sparking fears that Chinese metals demand could drop further, right as the country enters its peak construction season. Zinc, which is used in galvanized steel production, was hit especially hard, seeing its largest weekly percentage loss in over a decade. According to Bloomberg, China’s property sector has been hit in recent months as home prices and sales volumes have fallen. Home builders, many of which are cash-strapped and debt-ridden, have stopped construction on new projects, thereby weighing on demand for zinc and other metals.
| Zinc prices at the LME have dropped nearly $700/mt since the mid-August highs. Zinc’s forward curve has also shifted vertically lower and is severely backwardated. This allows a zinc end-user such as a galvanizer to hedge future purchases at prices lower than the current spot market. Buying swaps or call options are viable strategies, as either would establish a maximum zinc price. Such positions are basic for consumer hedging; however, they can result in opportunity costs or cash costs if metal prices decrease. Please contact AEGIS for specific strategies that fit your operations. (9/6/2022) |
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Note: Clients with AEGIS Platform access can see this and other research, plus hedge portfolio reporting and tools here. |
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Price Indications |
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Today's Charts |
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AEGIS Insights |
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8/31/2022: Will Chilean Production Issues Drive Copper Prices Higher? 8/31/2022: AEGIS Factor Matrices: Most important variables affecting metals prices 8/24/2022: Chinese Aluminum Supply Issues Could Rally Prices 8/16/2022: Zinc Prices Are On The Rebound Due To Supply Issues 8/9/2022: Aluminum prices are finding support: Consumers can lock in lower costs in 2023 and beyond |
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| Important Headlines | ||
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9/1/2022: Column: European smelter closures fracture aluminium pricing 8/31/2022: Copper output from Chile's Codelco to fall further in 2023, newspaper says 8/30/2022: Lista Smelter in Norway to Partially Curtail to Offset Energy Costs 8/30/2022: China's Sichuan, Chongqing resume power supply to industry 8/29/2022: Copper price back below $8,000 as hawkish Fed outweighs supply risk 8/26/2022: China's aluminum prices seen volatile as power crunch disrupts production: sources 8/26/2022: Codelco lowers 2022 copper production outlook 8/26/2022: Steel prices near bottom: Stelco CEO |
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Important Disclosure: Indicative prices are provided for information purposes only, and do not represent a commitment from AEGIS Hedging Solutions LLC ("Aegis") to assist any client to transact at those prices, or at any price, in the future. Aegis makes no guarantee to the accuracy or completeness of such information. Aegis and/or its trading principals do not offer a trading program to clients, nor do they propose guiding or directing a commodity interest account for any client based on any such trading program. Certain information in this presentation may constitute forward-looking statements, which can be identified by the use of forward-looking terminology such as “edge,” “advantage,” “opportunity,” “believe” or other variations thereon or comparable terminology. Such statements are not guarantees of future performance or activities.
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