SHAGNHAI, Jan. 17 (SMM) -- On Monday, SHFE 1204 zinc contract prices opened at RMB 15,220/mt, dipping to RMB 15,100/mt. A large number of longs entered the market in the morning session, with positions increasing by 20,000 lots, pushing up SHFE three-month zinc contract prices to touch RMB 15,370/mt. Finally, SHFE three-month zinc contract prices closed at RMB 15,310/mt, down RMB 10/mt, below the 5-day moving average. Trading volumes increased by nearly 30,000 lots to 195,428 lots, and total position decreased to 159,172 lots.
In domestic spot markets, SHFE three-month zinc contract prices fell slightly to the RMB 15,000/mt level, but spot discounts did not narrow. #0 zinc prices were RMB 200-230/mt below SHFE 1203 zinc contract prices around RMB 14,900/mt in the morning session. As SHFE zinc prices rose at noon, spot prices edged up to RMB 14,950/mt and #1 zinc was traded between RMB 14,850-14,900/mt. The market was quiet as it is the lasting trading week before the holiday. Spot discounts expanded to RMB 300/mt in the afternoon as SHFE zinc prices continued to rise, but downstream buying interest was low.
This week is the last trading week ahead of the Chinese New Year holiday, and some enterprises have suspended production, keeping transactions quiet. 50% market players believe SHFE 1204 zinc contract prices should remain fluctuating between RMB 15,000-15,500/mt this week, finding support at the RMB 15,000/mt level. Standard & Poor’s downgraded French AAA credit rating, but the market was expected that. LME zinc prices were relatively steady. China’s GDP will not be released until January 20th, while the market is still ahead of the holiday. Downstream producers advanced holiday due to low orders, and goods transportation gave priority to passenger transportation, and most logistics companies also have closed for the holiday, keeping spot markets extremely quiet. As such, LME zinc prices should move between USD 1,900-1,950/mt, while SHFE 1204 zinc contract prices should move between RMB 15,000-15,500/mt, with spot discounts between RMB 200-300/mt.
30% market players think zinc prices should rise further and meet resistance at RMB 15,800/mt. The market is expecting China will further cut deposit reserve ratio near the holiday. LME zinc prices should touch USD 2,000/mt level, while SHFE 1204 zinc contract prices should move between RMB 15,500-15,800/mt, with spot discounts between RMB 300-400/mt.
The remaining 20% believe zinc prices will fall. With resistance from arbitrage operation, SHFE zinc prices will barely rise. Downstream demand is weak as enterprises have suspended production for holiday. In this context, SHFE three-month zinc contract prices should move between RMB 14,700-15,000/mt, with spot discounts of RMB 200-300/mt.