Zinc prices rebounded from lows last week. The US economic growth was unexpectedly weak. But the core PCE rose 3.7%, far exceeding expectations. Inflation was high. Initial jobless claims were 207,000, indicating a strong labour market. The market expects that the Federal Reserve may postpone the interest rate cut. Fundamentally, the negotiation cycle for zinc concentrate TCs in May has started. Although the shipments arrivals at ports have increased recently, most of them are pre-ordered cargoes. Actual available cargoes are relatively scarce. The mines in north China have resumed production, but will not contribute to output until mid-May. Smelters have basically resumed normal production, with strong demand for ore. In the short term, the zinc concentrate supply will continue to be tight. But overseas shipments affected by the adverse weather are gradually recovering, and domestic output is also increasing. It is expected that the tight ore supply may be alleviated at the end of the second quarter.
In terms of downstream consumption, as the Labour Day holiday approaches, the downstream operation has improved slightly. Companies will close for 1-5 days for the Labour Day holiday, and some companies restocked finished product inventory in advance. Meanwhile, the low zinc price during the week gave the buyers an opportunity to replenish inventory, which drove the operating rates up. SMM social zinc inventory fell significantly by 8,100 mt to 212,800 mt. The market generally believes that the inflection point of social inventory has appeared, but according to the SMM survey, enterprises are not very confident in consumption in May for the time being. The improvement of social inventory is expected to be limited. Zinc prices are greatly affected by macro and capital factors. Bullish sentiment on fundamentals will be strong in the short term. Zinc prices are expected to run at a high level. But market participants need to be wary of price fluctuations caused by risk aversion before the holiday.
The SHFE 2406 zinc contract prices are expected to move between 21,800-23,400 yuan/mt.
LME zinc is expected to trade between $2,700-2,960/mt.
Spot discounts are expected to stand at 130-50 yuan/mt against the SHFE 2406 zinc contract.
