SHAGNHAI, Jun. 28 (SMM) -- On Monday, SHFE 1109 zinc contract prices opened lower at RMB 17,290/mt, with prices moving between RMB 17,250-17,300/mt in the morning session. Dragged down by the rising US dollar index, SHFE 1109 zinc contract prices fell to RMB 17,150/mt, and finally closed at RMB 17,190/mt, down RMB 205/mt, or down 1.18%. Total positions decreased by 8,062 lots to 187,832 lots, and trading volumes increased by over 30,000 lots to 295,892 lots.

SHFE 1109 zinc contract prices opened lower and then inched down in the morning session, pushing down spot zinc prices. #0 zinc was traded between RMB 17,050-17,100/mt, with mainstream traded prices at the low end, and with discounts of RMB 200-230/mt against SHFE 1109 zinc contract prices. Traded prices of #0 zinc fell to RMB 17,050/mt at noon as SHFE 1109 zinc contract prices fell, with some traded at RMB 17,030/mt. #1 zinc was traded between RMB 17,000-17,050/mt. Downstream buyers purchased modestly at lower prices, with transactions quiet. Offers of #0 zinc were as low as RMB 17,020/mt in the afternoon, but transactions did not improve due to market pessimism.

With regard to zinc price trends, market players all believe SHFE 1109 zinc contract prices should continue to fluctuate between RMB 17,000-17,600/mt this week.

Greek government reached an agreement with IMF on the new austerity policy, easing concerns over Greek debt crisis. But Italian banks shares plummeted sharply last week, stirring up concerns over Greek debt crisis again. It is also indeterminate if the Fed will implement another round of quantitative easing policy after buying USD 600 billion government bonds.

CPI for June is expected to be high, with the market cautious ahead of a possible interest rates hike. Premier Wen Jiabao predicted last week China’s austerity policies to curb fast rising consumer prices have taken effect, with goods prices expected to fall further, signaling the credit tightening policies will be loosen in 2H 2011.

In spot markets, zinc prices are strongly supported since many smelters advanced maintenances during the seasonal low demand period, and TC for zinc concentrate were still high. In addition, China will cut zinc import tax to 1%, down from 3%, starting July 1st. in this context, costs for import financing will likely fall despite zinc importing will be still in deficit. Offers of imported zinc are RMB 80-100/mt lower than domestic zinc, which is more competitive once the import tax is cut, so zinc prices should barely rise.

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