SMM Zinc Market Morning Review (2015-1-12)

SHANGHAI, Jan. 12 (SMM) – Comex crude oil prices fell for seven weeks on end last Friday, distressing market sentiment. China’s CPI and PPI dropped for the 34th straight month, and European economy remained sluggish, causing market concerns over deflation in China and Europe to increase. European stocks fell 1.3% last Friday. Major economic indicators from the US were mixed. Despite positive numbers from US job market, low salary triggered concerns over deflation and causing market expectations that the Fed will hike interest rate soon to decrease. This pushed down the US dollar index to fall slightly. LME zinc prices opened at USD 2,156.5/mt, then rose to test USD 2,175/mt, and closing at USD 2,160/mt, down USD 3/mt or 0.14%. Trading volumes were down 3,906 to 8,319 lots, and total positions decreased 1,101 to 299,404. LME zinc inventories fell 3,200 to 673,175 mt.

SHFE 1503 zinc contract prices opened at RMB 16,455/mt last Friday evening, then surged to RMB 16,590/mt, but fell back down to RMB 16,500/mt as a large number of investors left the market after profit-taking, and closing at RMB 16,475/mt, down RMB 20/mt or 0.12%. Trading volumes were down 21,130 to 88,460 lots, and total positions increased 2,236 to 160,590.

Sluggish CPI and PPI from China last Friday fueled market expectations over additional easy monetary measures. China’s M2 numbers in December will be announced today, and mixed non-farm employment data from the US will keep investors cautious. LME zinc prices are expected to move between USD 2,150-2,175/mt. SHFE 1503 zinc contract prices will move between RMB 16,430-16,530/mt, with spot premiums between RMB 200-250/mt against SHFE 1503 zinc contract prices.