SHANGHAI, Jul. 19 (SMM) -- SHFE 1110 zinc contracts became the most actively traded contracts on Monday. SHFE 1110 zinc contract prices climbed gradually in the morning session after opening at RMB 18,370/mt, with prices hitting an intraday high of RMB 18,540/mt in the midday. However, strong pressures and falling LME zinc prices caused SHFE 1110 zinc contract prices to slip gradually. Finally, SHFE 1110 zinc contract prices closed at RMB 18,390/mt, up RMB 70/mt, with prices standing above the 5-day moving average. Trading volumes increased by over 70,000 lots to 196,762 lots, while positions increased by 23,366 lots to 172,792 lots.
In zinc spot markets, SHEF 1110 zinc contract prices climbed gradually in the morning session, causing spot discounts to widen. Traded prices for #0 zinc were between RMB 18,000-18,050/mt, with discounts of negative RMB 350-400/mt against SHFE 1110 zinc contract prices, while traded prices for #1 zinc were between RMB 17,950-18,000/mt, with most deals made at the high-end. Widening discounts stimulated traders’ willingness to make purchases, but downstream processors took a cautious attitude. Overall transactions were brisk.
SHFE zinc prices fell early last week tracking LME zinc prices, with spot zinc prices standing at RMB 18,000/mt. With regard to zinc price trends this week, 60% of market players believe zinc prices will likely continue fluctuating at high levels. The debt crisis issue has not been virtually resolved, with Greek debt crisis continuing, while the US employment data was also worse than expected. In this context, the US dollar index should move between 75 and 76, while SHFE 1110 zinc contract prices will likely fluctuate between RMB 18,200-18,600/mt. Spot discounts against SHFE 1110 zinc contract prices may remain between negative RMB 400-500/mt, and transactions will be mainly made among traders.
The remaining 40% believe that SHFE 1110 zinc contract prices will continue rising to RMB 18,800/mt, but with spot zinc prices resisting increases. Spot discounts will likely expand further, presenting an opportunity for traders’ arbitraging operations.
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