LME Zinc Pulls Back Due to Bearish Sentiment Fuelled by Rate Meeting Minutes

SHANGHAI, Feb 23 (SMM) - On the news front, the minutes of Fed's interest rate meeting showed that the vast majority of Fed policymakers agreed to slow down the overnight interest rate hikes to 25 basis points at the policy meeting from January 31 to February 1, while it was also stressed that high inflation risk remained a "key factor" in monetary policy. US Treasury yields rose after the minutes were released, so did the US dollar index. During a meeting with Russian Foreign Minister Sergei Lavrov, Wang Yi, director of China's International Communication Office of the Central Committee, said that China was willing to maintain the sound development of the "new type of major-power relationship" with Russia regardless of the changing international situation.

Overnight, LME zinc opened at $3,113.5/mt and closed down $33.5/mt or 1.08% at $3,073/mt. The trading volume was 6,456 lots, and open interest added 1,429 lots to 198,000 lots. LME inventory declined by 425 mt to 31,025 mt. The expectations for supply increase brought by the production resumption of smelters overseas, together with the forecast for consumption downturn, were the culprit for the rapid decline in LME zinc prices.

The most-traded SHFE 2304 zinc contract opened at 23,560 yuan/mt overnight and was weighed down by falling LME zinc. It eventually settled at 23,460 yuan/mt, down 95 yuan/mt or 0.4%. The trading volume stood at 45,000 lots, and open interest gained 3,617 lots to 89,000 lots. 

Both LME zinc and SHFE zinc dropped overnight, but the decline of the latter was slower than the former, lifting the SHFE/LME zinc price ratio.

Although the growing galvanised zinc product consumption has driven the consumption of zinc ingots, the overall end consumption recovery still remains to be seen. Market players are warned against possible pullback of futures prices due to capital factors.