SHANGHAI, Sept. 20 (SMM) -- SHFE 1111 zinc contract prices opened slightly lower at RMB 16,700/mt on Monday, and later fell below the daily moving average, with prices firm between RMB 16,400-16,450/mt in the morning session given intense struggles between long and short investors. LME zinc prices fell again in the afternoon session, and coupled with short momentum, SHFE 1111 zinc contract prices fell further and finally closed at RMB 16,210/mt, down RMB 625/mt or 3.71%. Transactions were sluggish, and trading volumes remained low at 190,000 lots, while positions fell by 8,672 lots to 194,272 lots, with short momentum stronger. Positions for SHFE 1112 zinc contract increased significantly by 32,044 lots, to 167,616 lots, with short investors dominating positions.
In spot markets, as SHFE 1111 zinc contract prices tumbled after opening lower, spot zinc prices fell in response. Traded prices for #0 zinc were between RMB 16,350-16,370/mt, and prices even fell to RMB 16,320/mt in the midday, with discounts against SHFE 1111 zinc contract prices between negative RMB 70-80/mt. Traded prices for #1 zinc were between RMB 16,300-16,350/mt. Zinc prices plummeted, and downstream buying interest improved at lower prices, keeping trading sentiment brisk. As SHFE zinc prices fell further in the afternoon, spot discounts narrowed gradually to negative RMB 60/mt. Downstream consumers turned cautious, leading to sluggish trading sentiment.
European debt woes still weighed down markets. Although sources report that five major central banks will inject US dollar liquidity into European commercial banks, which briefly boosted zinc prices, market confidence was still depressed by a slowdown in global economy. In response, SHFE 1111 zinc contract prices plunged after opening slower on Monday.
With regard to zinc price trends this week, 20% market players believe zinc prices should rally to RMB 16,800-17,200/mt. Concerns over European debt crisis were absorbed Monday as zinc prices dipped. The market also absorbed concerns over slower US economic recovery and plan coping with European debt crisis. On the other hand, downstream buyers will build stocks ahead of the National Day holiday. Spot discounts narrowed as smelters were holding goods. In this context, SHFE 1111 zinc contract prices should rally to fluctuate between RMB 16,800-17,200/mt, with spot prices moving between RMB 16,500-16,900/mt.
20% market players believe zinc prices will experience corrections. SHFE three-month zinc contract prices should fluctuate between RMB 16,300-16,800/mt, while spot discounts will narrow further. Spot prices should remain between RMB 16,200-16,500/mt.
The remaining 60% market players think zinc prices will likely fall further as market confidence was depressed due to European debt crisis and since QE3 was not announced yet. Domestic inventories are above 500,000 mt, so prices will not rise despite smelters are holding goods. SHFE three-month zinc contract prices should fluctuate between RMB 16,000-16,300/mt, while spot prices should hold firm above RMB 16,000/mt level.