Zinc Prices Lacked Enough Momentum amid Lingering Bearish Macro Sentiment

SHANGHAI, Mar 24 (SMM) - Last night, the Bank of England raised interest rates for the 11th time in a row but said inflation would cool down quickly, sparking speculation that the hiking cycle will be over. The U.S. initial jobless claims fell last week, suggesting that the financial market turmoil following the recent collapse of two regional banks seemed to have no impact on the economy. ECB sent out hawkish messages again as its governing committee member Knott advocated another rate hike in May to curb high inflation.

Overnight, LME zinc opened at $2,877/mt and closed up $18.5/mt or 0.64% at $2,895.5/mt. The trading volume was 6,584 lots, and open interest dropped 23,333 lots to 185,000 lots. LME inventory declined by 50 mt to 39,700 mt. Despite the small decline, the LME zinc inventory generally showed an upward trend. The marginal impact of the crisis brought by tightened liquidity was persisting. At the same time, the overseas expectations for growing zinc ingot supply and sluggish consumption together had limited fundamental support for LME zinc prices.

The most-traded SHFE 2305 zinc contract opened at 22,100 yuan/mt and closed at 22,455 yuan/mt, up 240 yuan/mt or 1.08%. Trading volume stood at 73,000 lots, and open interest lost by 2,280 lots to 108,000 lots. The momentum of SHFE zinc prices was suppressed by the potential of rising supply. In terms of consumption, since traders in the galvanised zinc market tended to purchase on rises instead of dips, the falling ferrous metal prices took a toll on the new orders for galvanised plate/sheet and structures. As such, the support for SHFE zinc prices from downstream consumption also weakened. However, SMM believes that the consumption will be resilient for some time considering the rigid demand during the ongoing peak season.