SHAGNHAI, Aug. 22 (SMM) -- Last Friday, SHFE 1111 zinc contract prices opened lower at RMB 16,850/mt in the morning tracking weakening LME zinc prices overnight, moving between RMB 16,750-16,850/mt during the day. Finally, SHFE 1111 zinc contract prices closed at RMB 16,885/mt, down RMB 185/mt, or down 1.08%. Trading volumes decreased significantly by 200,000 lots to 603,360 lots, while total positions increased by 9,142 lots to 240,938 lots, with the short momentum stronger.
In domestic spot markets, SHFE 1111 zinc contract prices opened below RMB 17,000/mt, dragging down spot prices. #0 zinc was traded between RMB 16,600-16,650/mt, with discounts of RMB 80-100/mt against SHFE three-month zinc contract prices. Some brands were traded as high as RMB 16,900/mt as smelters had been holding goods. #1 zinc was traded between RMB 16,550-16,600/mt. Downstream buyers were cautious due to falling prices ahead of the weekend, while cargo holders were holding prices firm, keeping transactions quiet.
The newly approved 70 kt of warehouse holding capacity was not recorded. According to data from SHFE, spot inventories surged by over 20,000 mt, to 421,192 mt last week. SMM believes the high inventories were not from the newly added spot inventories as SHFE stocks fell significantly by 21,854 mt. Since spot discounts had narrowed to RMB 200/mt as spot inventories were being consumed while smelters were holding goods, goods supply available was mainly from arbitragers aggressively closing positions with profit-taking, so the surged inventories were mainly from warrants released by arbitragers.