SMM Daily Review - 2011/9/13 Zinc Market

SHAGNHAI, Sept. 14 (SMM) -- On Tuesday, SHFE three-month zinc contract prices plummeted below the moving average after opening, dragged down by LME zinc prices overnight, fluctuating between RMB 16,850-16,950/mt during the day. In the afternoon, SHFE three-month zinc contract prices gained back previous losses due to rising Shanghai Stock Exchange composite index, and closed at RMB 16,945/mt, down RMB 175/mt, or down 1.02%. Trading volumes increased by over 70,000 lots to 318,610 lots, while total positions decreased by 1,796 lots to 231,778 lots.

In domestic spot markets, #0 zinc was traded between RMB 16,700-16,750/mt, with discounts narrowing to negative RMB 150-170/mt against SHFE 1111 zinc contract prices. #1 zinc was traded between RMB 16,650-16,700/mt. Downstream buyers were cautious on the first trading day after the Mid-Autumn Day festival, while traders replenished stocks at lower prices. Spot discounts did not expand despite rising SHFE zinc prices, and downstream buying interest improved, while cargo holders were unwilling to sell goods, leaving transactions muted.

With regard to zinc price trends this week, 60% of market players believe prices will continue to fluctuate, with SHFE three-month zinc contract prices struggling between RMB 16,800-17,200/mt. There is neither positive news, nor downstream strong demand reported, while most smelters are holding goods, which will support spot prices. Spot prices should fluctuate between RMB 16,600-17,000/mt.

20% of market players believe that zinc prices will likely rise, to RMB 17,200-17,600/mt, and spot zinc prices will rise to RMB 17,000-17,300/mt in response. Enterprises will build stocks ahead of the National Day holiday, pushing up zinc prices.

The remaining 20% believe that zinc prices will likely fall. SHFE three-month zinc contract prices should fall to RMB 16,300-16,800/mt, while spot prices will drop to RMB 16,000-16,500/mt. If Greece defaults, zinc prices will further fall, while spot prices should hold firm due to tight supply.