SHFE Zinc Opened Lower Overnight, Stay Alert To Macro Factors

SHANGHAI, Mar 8 (SMM) - Overnight, Fed Chair Powell said the US central bank was likely to raise rates more than previously expected. The GDPNow model of Federal Reserve Bank of Atlanta revealed the latest estimate of the seasonally adjusted GPD annualised rate for the first quarter at 2.0%, down from the previous forecast of 2.3% on March 1. According to European Central Bank (ECB) Governing Council, the ECB is expected to continue raising interest rates for a considerable period of time after March. In addition, during Powell's speech, the money market for the first time fully digested the expectations that the ECB will raise interest rates by another 150 basis points by July. China’s reform of State Council includes the establishment of the State Financial Regulatory Administration, the in-depth reform of local financial regulatory system, the reform of the branches of the People's Bank of China, the improvement the state-owned financial capital management system, and reduction of the civil servants at central government agencies by 5%, etc. According to the General Administration of Customs, in the first two months of this year, China's total import and export value was 6.18 trillion yuan, a slight decrease of 0.8% year-on-year. Among them, the export was 3.5 trillion yuan, an increase of 0.9%; the import was 2.68 trillion yuan, a decrease of 2.9%; the trade surplus recorded 810.32 billion yuan, a gain of 16.2%.

LME zinc opened at $3,040.5/mt overnight and kept falling before closing down $104.5/mt or 3.42% at $2,947/mt. Trading volume rose to 8,473 lots, and open interest decreased by 2,003 lots to 191,000 lots. LME zinc inventory added by 4,275 mt to 39,125 mt. Hawkish remarks on the macro front and a substantial increase in inventory put downside pressure on LME zinc.

The most traded SHFE 2304 zinc contract opened lower at 23,230 yuan/mt in overnight trading and closed at 23,240 yuan/mt, down 185 yuan/mt or 0.79%. The trading volume was down to 54,007 lots, and open interest added 1,092 lots to 82,763 lots.  In Powell’s testimony, the Fed was likely to raise rates more than previously expected, which sent the U.S. dollar index jumping and non-ferrous metal prices falling. Although the consumption peak season is arriving, downstream enterprises still take a wait-and-see stance due to uncertainty over new order sustainability. SMM estimates zinc prices will remain rangebound with stable fundamentals.