Zinc on MCX settled up 0.94% at 155.75 as fresh shutdowns in China's steel sector added to mine supply concerns to ignite a short-covering rally. The jump in zinc occurred after state media said that China plans to cut steel production by 2.91 million tonnes in inner Mongolia this year. LME zinc inventories are still relatively high at 454,175 tonnes. Volumes were huge, with zinc turnover on the London Metal Exchange (LME) of over 17,000 lots, more than double the activity in aluminium, one of the most active contracts. LME zinc rallied to its highest since May 2015 at $2,333 a tonne before retreating. Zinc, used to rust-proof steel, failed to trade in closing open outcry activity but was bid up 0.7 percent to $2,314, taking this year's gains to 44 percent. Combined zinc inventories in Shanghai, Tianjin and Guangdong fell 7,300 to 291,100 tonnes in the week. Inventories in Guangdong fell 1,600 tonnes as some smelters in Yunnan and Guangxi chose to ship goods to Shanghai. Zinc inventories in both Shanghai and Tianjin fell further because of improving downstream purchases and limited inbound shipments. Glencore Plc's decision to cut zinc output to fight a rout in prices last year has been vindicated as the metal has rallied in 2016, according to Morgan Stanley, which held out the possibility that the commodity trader may order restarts. Zinc has led gains in metals this year after the shutdown of depleted mines coupled with Glencore's cutbacks. Technically market is under short covering as market has witnessed drop in open interest by -4.67% to settled at 10307, now Zinc is getting support at 154.9 and below same could see a test of 154 level, And resistance is now likely to be seen at 156.4, a move above could see prices testing 157.

Trading Ideas:

Zinc trading range for the day is 154-157.

Zinc rallied as fresh shutdowns in China's steel sector added to mine supply concerns to ignite a short-covering rally.

The jump in zinc occurred after state media said that China plans to cut steel production by 2.91 million tonnes in inner Mongolia this year.

Zinc inventories in both Shanghai and Tianjin fell further because of improving downstream purchases and limited inbound shipments.