Zinc trading is one of the many ways to break into non-precious metal commodity trading. Although this 2023 guide cannot guarantee that you will get rich from intraday Zinc trading, it will provide a tool kit to help you get started. We will explore what it is and a brief history before delving into how to trade Zinc as well as the benefits and disadvantages of doing so. We also share strategies and tips on trading the commodity and list the the best Zinc brokers.
The Best Brokers For Zinc Trading
What Is Zinc Trading?
Zinc trading involves speculating on the future movements of the value of zinc using a variety of different financial products, such as bullion, CFDs, options and futures. A form of commodities trading, zinc speculation sits alongside aluminium and copper as a functional, non-precious metal that is used the world over.
Zinc is primarily produced by China, Peru, Australia, the USA, Canada, India and Kazakhstan. The popularity and abundance of the metal come from its use in a wide variety of products and industries. These include medicine, anti-rust layering, paint, TV & X-ray screens, die-casting alloys, brass and batteries.
History Of Trading Zinc
Historical data on the price of Zinc can be found on Trading Economics or through price charts on analysis platforms like TradingView, going back as far as February 1960. The metal trading industry was not well regulated until the late 1970s, when trading became available on exchanges such as the London Metal Exchange (LME). Before this point, zinc prices barely breached USD 360/tonne.
The highest recorded price of Zinc was USD 4603.00/tonne in November 2006, attributed to a global metal deficit.
Factors That Influence The Price Of Zinc
Below is a list of key price drivers for Zinc:
- Chinese Supply & Demand: China is a top consumer of Zinc, mainly in the galvanised steel industry, as well as a top supplier. This means that a change in Chinese demand for Zinc can have a significant impact on global levels. Additionally, increased environmental awareness within China could reduce its supply of the metal.
- Global Stocks: Shortages or stockpiles of Zinc have a huge impact on price. These can come about from recessions, mining strikes, energy cost changes and natural disasters. Anything that can impact the production process of Zinc or affect international consumer confidence in the Zinc market will ultimately impact supply, demand and price. Zinc inventories are held at the LME and Shanghai Futures Exchange (SHFE), so keep an eye on these to get an indication of price movements.
- Input Prices: A Zinc production company refines Zinc ores, which requires coal, crude oil, and electricity. Therefore, the prices of these different inputs will impact the supply of Zinc in the global market, influencing its value.
- US Demand: The US is a huge consumer of Zinc for construction and automotive industries. A strong US economy can mean high demand for Zinc, which can make it more valuable, and vice versa. The state of the US economy can therefore be used as an indicator for Zinc prices.
How To Trade Zinc
- Zinc Futures: Zinc futures are a derivatives product that demonstrates an agreement between the buyer and seller to settle the change in price of zinc between the start time of the contract and an agreed future date. Futures are popular with some major online brokers, as well as derivatives or commodity exchanges, such as the Chicago Mercantile Exchange. Some firms will also offer mini futures, a shorter-term alternative.
- Zinc CFDs: Contracts for difference operate slightly differently from futures contracts, giving the trader much more freedom. With a CFD, the trader will open a long (rising) or short (falling) position on the value of zinc at a selected time. The trader will then close the position, settling the contract, whenever they see fit. The returns from the trade are calculated from the difference in the value of zinc between the two times.
- Zinc Bullion: Bullion refers to physical pieces of zinc, such as bars, ingots or specialised coins. Trading bullion is the oldest form of metal trading, though it can be inconvenient for modern traders and physical delivery of the zinc is required and there are storage and logistical costs to be considered.
- Zinc ETFs: Exchange-traded funds take out much of the manual work involved with trading. Instead, you simply place some of your capital into the fund, with a team of professionals diversifying the fund’s assets and investments to best predict and benefit from the volatility of zinc.
- Zinc Shares: It is also possible to trade shares of Zinc-related companies. These can sometimes be harder to find with brokers that do not offer a wide range of company shares, so double-check before signing up. However, these companies can be a great way to use equities that will change in value in correlation with zinc. Some examples of these companies are:
- Teck Resources – listed on the New York Stock Exchange (NYSE)
- Hecla Mining – listed on the NYSE
- Hubday Minerals – listed on the NYSE
Pros Of Trading Zinc
- Diversification: If you are an avid trader, it is important to have a diverse portfolio to be insulated from big shocks. Commodities like zinc, gold or iron can often have a negative or low correlation with other market movements. This means that they can hold their value if the rest of your portfolio drops.
- Emerging Need: Emerging economies tend to have a very high demand for commodities like zinc, providing a fairly easy way to predict future price movements.
- Volatility: Given the reduced popularity of zinc compared to other trading products, the metal is often fairly volatile. For those with the right strategies and timing, this can be instrumental in producing large profits.
Cons Of Trading Zinc
- Volatility: Volatility is a double-edged sword. Where it can help some traders make their millions, it can also cut down others.
- Chinese Consumption: China is a massive consumer and supplier of zinc. However, it announced a plan in 2021 to begin releasing its reserves of the metal. This could end up wreaking havoc on the value of zinc in the international markets.
Zinc Trading Strategies
- Sell-Into-Strength: This approach entails selling into a short position or out of a long position when the price of zinc is on the rise. The reasoning behind this seemingly counter-productive move is to preempt an imminent market reversal, looking to best take advantage of the move. This can be done either as a lump-sum move or by averaging over a longer period to limit any losses. The opposite of this, buying-into-weakness, works the same way when the market is bearish.
- Range Trading: This strategy is popular for a wide range of assets as it can be applied directly to the statistical movements of price charts. The philosophy behind range trading is that the asset value will rise, fall and steady at specific levels, demonstrating periodic volatility between what are known as support (lower) and resistance (upper) boundaries. The strategy poses that the asset’s value will oscillate between these two points several times before breaking out to form new ones. If you can identify these support and resistance levels, you can see where best to go long or short and take advantage of the periodic nature of the price movements.
How To Start Trading Zinc
- Find A Broker: The first step on your zinc trading journey is to find a good, safe brokerage that offers zinc products. You should initially narrow your search by looking for those firms that offer the zinc instruments (CFDs, options etc). Once this is done, we recommend comparing a range of companies and considering regulation, account pricing, trading platforms, asset ranges and customer support.
- Enact The Strategy: Once you have registered for an account and deposited some money, you can begin analysing price charts or the news to find the optimal entry point for your trading strategy. When you and your strategy are ready, open a position.
- Take Your Profits: Your trading strategy should also tell you when is best to close your position, whether it is successful or not. Over time, you should refine your strategy as you get to learn what does and doesn’t work.
Tips For Trading Zinc Today
- Zinc Trading Robots: Once you have developed confidence in your trading strategy, you can automate it using one of the many tools and platforms available. This allows each trade to be made more quickly and without distraction, helping optimise your returns.
- Demo Accounts: To safely practise new strategies, brokers and asset types, you should use demo accounts. These make use of electronic funds in a real-time simulated environment to produce a truly-risk free practice space.
- News: Keep yourself updated with all the relevant news on the zinc market, whether it be mining strikes, oil price changes or natural disasters – anything that can drastically impact the supply or demand of zinc, you need to know about.
Final Word On Zinc Trading
Zinc intraday trading can be an exciting opportunity to make some money from one of the less popular, therefore more volatile, metal commodities. Zinc can be speculated upon using a wide array of technical and fundamental analysis approaches, allowing you to take advantage of statistical recurrences and global events to make a profit. However, always be sure to enact strict risk management to keep your profits intact.
See our list of Zinc brokers to get started today.
What Are The LME Zinc Trading Hours?
LME Zinc’s opening hours are 11:40 GMT and its closing hours are 17:00 GMT. However, the exchange’s inter-office telephone trading service is open 24 hours a day.
Is Zinc Trading Risky?
All financial speculation carries with it a level of risk, even zinc trading. However, through careful strategising and risk management, you can help mitigate the losses caused by the unpredictable markets.
Where Do I Learn More About Trading Zinc?
There are a huge number of resources for zinc trading. Take to the internet for a wide array of webinars, PDFs, ebooks, video tutorials and blog posts or even find a physical book to read.
What Happened To IronBark Zinc Limited?
Ironbark Zinc was a big name as the Australian Securities Exchange. In 2018, the company was granted a trading halt by the Australian Stock Exchange (ASX) for capital raising. They have since been successful.
Is Trading Zinc Halal?
Zinc trading can be both halal and haram, depending on how it is undertaken. If you are careful with your analysis and ensure that every position you take is well-informed, it will tend to be halal. You should also look out for Islamic accounts, which remove any overnight swap payments.