SHFE and LME Zinc Prices Both Decline amid Poor Market Demand

SHANGHAI, Feb 6 (SMM) - LME zinc: Market players still paid close attention to the US Fed's rate hikes last week. Early last week, the annual rate of US core PCE price index was 4.4% in December 2022, the smallest increase since October 2021. The market expects the US Fed to slow down the rate hikes. LME zinc prices gained weaker support and dropped somewhat since the natural gas prices declined with the rise in temperature in Europe, but zinc prices stopped falling and stabilised afterwards amid the historically low LME zinc inventory. Then the US Fed raised interest rates by 25 basis points, but the inflation was still high, suggesting that the Fed will raise interest rate further. The US January ISM manufacturing PMI dropped to 47.4, the lowest level since May 2020. Demand from many downstream sectors was sluggish, thus LME zinc prices fell again. Previously, the number of US initial jobless claims recorded 183,000, highlighting the resilience of the job market. The world focused on the recovery of the Chinese market, propping up the futures prices. LME zinc prices stabilised amid the game between longs and shorts. As of 15: 00 last Friday February 3, LME zinc closed at $3,346/mt, with a weekly drop of $102/mt or 2.96%.

SHFE zinc: At the beginning of last week, domestic industrial players began to resume their work. SMM survey showed that the zinc ingot stocks across seven major Chinese markets added 55,000 mt during the Chinese New Year (CNY) holiday, which, coupled with the expected growth of supply, depressed SHFE zinc prices. However, the market still expects the consumption to recover strongly with the continuous release of bullish macro news in terms of real estate and automobile consumption in various places. SHFE zinc prices stopped falling and rebounded with the support of longs. Chinese January manufacturing PMI rose to 50.1, and the economy improved palpably. However, the overall demand remained poor, and the longs and shorts wrestled over each other, thus the SHFE zinc prices moved rangebound. Afterwards, the SHFE zinc prices suffered pressure from the fall in LME zinc prices and dropped to 24,150 yuan/mt with limited support from the fundamentals. As of 15: 00 last Friday February 3, SHFE zinc closed at 24,105 yuan/mt, with a weekly drop of 660 yuan/mt or 2.67%.