SHAGNHAI, Oct. 11 (SMM) -- On Monday, SHFE three-month zinc contract prices opened at RMB 15,170/mt, touching RMB 15,365/mt after opening, but met resistance at the 10-day moving average. SHFE three-month zinc contract prices inched down in the morning session, and fell to the 5-day moving average at noon. In the afternoon, SHFE three-month zinc contract prices closed at RMB 15,110/mt, up RMB 40/mt. Trading volumes decreased by 111,000 lots to 293,746 lots, while total positions increased by 6,586 lots to 201,016 lots.
In domestic spot markets, traded prices of #0 zinc were around RMB 15,150/mt in the morning session, and around RMB 15,100/mt in the afternoon as SHFE zinc prices fell. #1 zinc was traded between RMB 15,050-15,100/mt. Transactions improved compared to before the holiday. But SMM understands that downstream buyers preferred to purchase modestly, with cautious sentiment prevailing in the market.
Due to ongoing European crisis and mixed US job data, LME zinc prices moved between USD 1,820-1,930/mt during China’s National Day holiday.
With regard to zinc price trends this week, 40% of market players believe SHFE three-month zinc contract prices should rise to RMB 16,000/mt level. The US dollar index will move between 78-79. In domestic spot markets, as spot prices are close to SHFE three-month zinc contract prices, and since downstream buyer will replenish stocks, spot prices should find support. SHFE three-month zinc contract prices should move between RMB 15,500-16,000/mt, while spot prices will be firm between RMB 15,500-16,000/mt.
40% market players believe zinc prices should experience narrow corrections. SHFE three-month zinc contract prices are expected to move between RMB 15,000-15,500/mt, and spot zinc prices will fluctuate between RMB 15,000-15,500/mt.
The remaining 20% think zinc prices will likely fall further this week, to RMB 15,000/mt level. Although spot demand is improving, smelters will aggressively produce in order to meet the production target, so supply surplus will not ease. Given tightening cash flow and positive economic situation, zinc prices will not stabilize despite higher spot prices. SHFE three-month zinc contract prices will likely fall to RMB 14,500-15,000/mt, with spot prices moving between RMB 14,550-15,050/mt.