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SMM Daily Review - 2011/9/5 Zinc Market
Sep 6,2011 09:19CST
price review forecast
SHFE 1111 zinc contract prices opened slightly lower at RMB 17,015/mt on Monday。

SHANGHAI, Sept. 6 (SMM) -- SHFE 1111 zinc contract prices opened slightly lower at RMB 17,015/mt on Monday, and later faced pressure from the 5-day moving average and lacked upward momentum after briefly climbing to RMB 17,165/mt in the morning session, with prices later falling gradually below the daily moving average. SHFE 1111 zinc contract prices even plummeted below RMB 17,000/mt in the midday due to strong short selling momentum, with prices mainly moving between RMB 16,950-17,000/mt in the afternoon session and finally closing at RMB 16,945/mt, down RMB 135/mt or 0.79%. Trading volumes increased by nearly 40,000 lots to 382,320 lots, while positions fell by 10,906 lots to 264,074 lots. 

In spot markets, traded prices for #0 zinc were around RMB 16,950/mt in the morning session, but later fell to between RMB 16,800-16,850/mt as SHFE zinc prices tumbled, with spot discounts against SHFE 1110 zinc contract prices remaining at negative RMB 80/mt. #1 zinc was traded between RMB 16,750-16,850/mt. Most market players stayed out of the market when zinc prices were low, and trading volumes were limited. Spot prices even fell to RMB 16,800/mt in the afternoon, but most buyers were still standing on the sidelines.
The worse-than-forecast US non-farm employment data for August triggered speculations the US Federal Reserve will announce QE3 at its September meeting. Meanwhile, China’s central bank ordered commercial banks to include margin deposits in required reserves starting this Monday.

With regard to zinc price trends this week, 50% of market players believe prices will continue fluctuating. The worse-than-forecast US employment data will cause the Fed to develop further economic stimulus policies, including the possibility of QE3. On the other hand, downstream operation will improve during the high demand season. In this context, SHFE three-month zinc contract prices should move between RMB 17,000-17,500/mt, with spot zinc prices expected to be between RMB 16,600-17,100/mt.

33% market players believe that SHFE three-month zinc contract prices will fluctuate between RMB 16,700-17,200/mt. Current economic condition will not improve even if QE3 is announced. In addition, prices are firm as smelters have been holding goods, or moved goods modestly, so zinc prices will not fall sharply, with spot prices expected to fluctuate between RMB 16,500-16,800/mt.

The remaining 17% believe zinc prices are likely to fall. Despite a possibility of QE3, the debt crisis in Euro zone still continues, and China is implementing prudent monetary policies. In addition, downstream production runs were still low. In this context, SHFE three-month zinc contract prices will fall slightly to move between RMB 16,400-16,800/mt, with spot prices close to or slightly lower than SHFE zinc prices.


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