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SMM Daily Review - 2011/8/15 Zinc Market
Aug 16,2011 09:35CST
price review forecast
Source:SMM
SHFE 1111 zinc contracts became the most actively traded contracts on Monday.

SHANGHAI, Aug. 16 (SMM) -- SHFE 1111 zinc contracts became the most actively traded contracts on Monday. SHFE 1111 zinc contract prices opened slightly higher and stood above RMB 17,000/mt, with prices mainly moving between RMB 17,200-17,250/mt. Since the US dollar index strengthened and LME zinc prices slipped, SHFE 1111 zinc contract prices edged lower to between RMB 17,100-17,150/mt, with prices finally closing at RMB 17,175/mt, up RMB 125/mt. Trading volumes increased by over 3,000 lots to 184,442 lots, while positions increased by 22,108 lots to 179,564 lots, with short momentum stronger, indicating markets were cautious toward prices at RMB 17,000/mt.

SHFE 1111 zinc contract prices opened slightly higher but slipped in the midday. In spot markets, traded prices for #0 zinc were between RMB 16,900-16,950/mt, with deals mainly made at the low-end and with discounts of negative RMB 150-160/mt against SHFE 1110 zinc contract prices. Traded prices for #1 zinc were between RMB 16,850-16,900/mt. Spot zinc prices neared RMB 17,000/mt, and downstream consumers showed higher interest in purchasing goods at first, but later their buying interest became lower as zinc prices moved higher, with overall trading sentiment moderate.

Following the US credit rating cut by Standard & Poor’s rating agency, rumors that French credit rating will be downgraded further shake market confidence, despite was refuted by rating agencies.

With regard to zinc price trends this week, 50% market players believe that SHFE 1111 zinc contract prices will consolidate at RMB 17,000/mt level, moving between RMB 17,000-17,500/mt. Since the market has absorbed US credit rating cut, and as Standard & Poor’s as well as Moody’s claimed to keep France’s AAA credit rating unchanged, market concerns has gradually eased. Downstream buying interest is low at RMB 17,000/mt, keeping transactions quiet. As a result, SHFE 1111 zinc contract prices should move between RMB 17,000-17,500/mt, with spot discounts remaining between negative RMB 200-400/mt.

33% market players predict that SHFE 1111 zinc contract prices are expected to touch RMB 18,000/mt mark. As both US stocks and Shanghai Stock Exchange composite index gained back previous losses due to easing market concerns, SHFE three-month zinc contract prices should trend upward. Besides, smelters have been holding goods due to falling zinc prices, causing inventories in China to fall, and cause spot discounts to narrow sharply, and which will push up zinc prices.

The remaining 17% indicate that zinc prices will likely fall further. The market was expecting last week the US will release QE3 following the credit rating cut, boosting SHFE three-month zinc contract prices. But as spot transactions worsened, SHFE three-month zinc contract prices should fall to fluctuate between RMB 16,500-17,000/mt, with spot discounts narrowing to negative RMB 100-200/mt.

 

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