SMM Zinc Market Morning Review (2015-6-1)

SHANGHAI, Jun. 1 (SMM) – Disappointing economic indicators from the US depressed market sentiment and weighed down base metals prices. LME zinc prices opened at USD 2,234/mt, then rose to USD 2,260/mt, but fell back again below the 5- day moving average, and closed at USD 2,184.5/mt, down USD 48.5/mt or 2.17%. Trading volumes increased 766 to 13,273 lots, and total positions grew 305 to over 320,000. LME zinc inventories fell 2,075 to 450,000 mt.

SHFE 1508 zinc contract prices opened at RMB 16,740/mt last Friday evening, then dropped to RMB 16,660/mt, and closed at RMB 16,660/mt, down RMB 160/mt or 0.95%. Trading volumes decreased 17,394 to 79,996 lots, and total positions grew 5,514 to over 144,000.

US Commerce Department reports US seasonally Q1 growth was down 0.7%, compared to a 0.8% expected decline and a 0.2% rise in flash data. The inclement weather and a strengthening US dollar index constrained US exports. This should refrain the Fed from raising interest rate, pushing down the US dollar index. Chicago’s May PMI fell from 52.3 in April to 46.2, much lower than market expectations. However, University of Michigan’s CCI in May was better than market expectations and the flash data, though hit a six-month low.

The number of US oil drilling platforms unexpectedly decreased 13 to 646, its lowest since August 2010. This boosted crude oil prices. COMEX crude oil prices soared 4.5%, while BRENT oil prices jumped 4.8%. But base metals prices fell sharply on selling pressure.

The US dollar index fell 0.17%; the EUR:USD rose 0.42%. China’s stocks markets fluctuated widely, and European and US stocks mostly increased. LME base metals prices closed with declines with the exception of tin.

China’s official PMI for China due for release today is not promising. LME zinc prices are expected to move between USD 2,180-2,210/mt today. SHFE 1508 zinc contract prices will fluctuate between RMB 16,650-16,750/mt, with spot discounts of RMB 110-70/mt against SHFE 1507 zinc contract prices.