SMM Zinc Market Morning Review (2015-2-27)

SHANGHAI, Feb. 27 (SMM) – LME zinc overnight started at USD 2,065/mt and then advanced to USD 2,098/mt before falling to USD 2,070-2,080/mt during European and US trading hours and ending up USD 12.5/mt, or 0.61% at USD 2,073/mt. Trading volumes for three-month zinc on the London Metal Exchange shrank 4,191 lots to 9,682 lots, while positions gained 855 to 283,824. LME zinc inventories increased 25 mt to 569,025 mt.

Zinc for May delivery on the Shanghai Futures Exchange, the most active contract, opened at RMB 16,080/mt and then slid to RMB 16,040/mt before finishing up RMB 35/mt, or 0.22% at RMB 16,055/mt in Thursday’s night session. Trading volumes for the most active contract added 3,332 lots to 53,166 lots, while positions shed 1,498 to 126,630.

US durable goods orders, published on Thursday, soared 2.8% MoM in January, well above a 1.6% rise expected. During the same period, the country’s CPI declined 0.7% MoM due to sliding crude prices. However, the so-called core CPI, which excludes food and energy prices, rose 0.2% MoM, beating expectations.

San Francisco Fed President John Williams indicated that he expects the US to reach full employment by the end of this year and the US Federal Reserve to raise rates “sometime this summer, or this fall” if the economic data come in as expected. The comments sent the US dollar index sharply higher to stand above 95 on Thursday, but caused base metals prices to give up gains.

The GfK institute reported on Thursday that Germany’s forward-looking consumer confidence index rose to a 13-year high of 9.7 in March, above expectations and February’s reading. The country’s seasonally adjusted unemployment remained at a record low of 6.5% for a third straight month in February. These inspiring economic indicators boosted growth expectations for the largest European economy. Meanwhile, the euro zone’s economic climate index was 102.1 in February, beating expectations and hitting its highest since July 2014.

Crude prices rose sharply on Wednesday following comments by Saudi Arabia that crude demand is growing and assertion by the International Energy Agency (IEA) that low crude prices are short-lived. However, investors were still much concerned by record US crude oil inventories, leading to a 5.5% tumble in crude prices on Thursday.

The US dollar index jumped 1.17%, while the euro slipped 1.47% versus the greenback on Thursday. European and US stocks rose across the board. LME tin dropped slightly, but other base metals closed higher, with copper up as much as 1.74%.

On Friday, LME zinc is expected to move between USD 2,055-2,085/mt against a sharp rise in the US dollar index and continued slump in crude prices. The most active SHFE 1505 zinc contract is set to fluctuate between RMB 16,000-16,100/mt, while spot zinc in China should trade at a RMB 60-100/mt premium to the SHFE 1504 zinc contract.