The trading range in zinc seems to get narrower with each passing week and the near-term outlook is likely to see more of the same. But eventually, prices are expected to break out and the break is projected to be to the upside. As is the case with copper, some patience may be required for clients holding existing positions; however, I do expect that patience to ultimately be rewarded with a challenge of the early May highs near $4,100/mt. Demand is expected to improve in the 4th quarter and LME warehouse stocks of zinc are very low, standing at just less than 66,000 metric tons, down 40% from the mid-March levels above 111,000 metric tons.

Although additional near-term sideways trading is anticipated, there is a chance of a sell-off if U.S. equity markets decline further or more concerns arise in the ongoing "credit crunch" situation. If prices test the support in the $3,200-$3,300/mt area, clients should consider entering the market there; otherwise, hold existing positions...