SMM zinc price review and forecast

Market expectations over interest rate cuts by the US Federal Reserve still existed after the release of US inflation indicators, and LME inventories were also declining, keeping LME zinc prices strong; the domestic zinc concentrate shortage has not eased yet, and TCs are moving at low levels. Smelting costs may gradually increase, which will affect the actual output. During last week, Hunan Sanli suspended production for one month due to power supply issues, with an estimated impact on output of 4,000-5,000 mt. In terms of consumption, China’s State Council reiterated the old-for-new policy and the issuance of 1 trillion yuan ultra-long-term special treasury bonds is expected to further boost demand. But the high zinc prices further restricted consumption. Meanwhile, the continued decline in ferrous metals prices dampened consumption by galvanising companies. SMM data showed that social zinc inventories in seven regions in China once again increased by 1,800 mt to 187,900 mt, and the spot premiums also ran at a low level.

Forecast: SHFE 2404 zinc contract prices: 21,000-21,800 yuan/mt

LME is expected to trade between $2,450-2,650/mt.

Spot discounts in China’s major markets are expected to stand at 80-0 yuan/mt.