SMM Morning Review – 2011/12/7 Zinc Market

SHANGHAI, Dec. 7 (SMM) – Market sentiment during Asian trading hours was depressed by the S&P’s warning of a possible mass credit rating downgrade for euro zone nations, including Germany and France. As a result, LME zinc prices came under pressure at the daily moving averages, moving between USD 2,003-2,028/mt. Later, Germany's factory orders grew 5.2% in October, much higher than market expectations, helping improve market sentiment. LME zinc prices, therefore, rallied at the tail of trading, with prices finally ending at USD 2,048/mt, up USD 17/mt. Trading volumes were down 928 lots to 5,032 lots, and positions were down 156 lots to 270,527 lots. Inventories were down 1,925 mt to 736,200 mt.

Markets are continuing to take a wait-and-see stance to wait for the development of the EU summit. Despite continuous declines, LME zinc prices are able to find a strong support at the low end, and SHFE 1202 zinc contract prices will likely fluctuate in the RMB 15,450-15,700/mt range. Traded prices of #0 zinc in domestic spot markets on Wednesday may be flat with levels on Tuesday, with discounts expected between negative RMB 50-100/mt, and transactions are expected to be generally made between RMB 15,550-15,650/mt.