SHANGHAI, Feb. 6 (SMM) -- SHFE zinc prices failed to keep pace with strong gains made by LME zinc prices after the Chinese New Year holiday. SHFE three-month zinc contract prices hit a high of RMB 16,360/mt after opening up on the first trading day after the holiday, but fell later in the week to below RMB 16,000/mt due to strong short selling pressures. Prices later struggled around the 5-day moving average and frequently tested RMB 15,800/mt.
Spot zinc markets remained quiet after the holiday as most downstream producers were still closed from the holiday. As SHFE zinc prices surged early last week, spot discounts gradually grew to RMB 400/mt over SHFE three-month zinc contract prices. This arbitrage window improved trader demand for registered zinc brands. Most deals last week were made by traders and mainly between RMB 15,500-15,800/mt. Spot discounts gradually narrowed later in the week to RMB 260-300/mt due to declines in SHFE zinc prices.
Many downstream producers are not expected to resume production until February 6th. Since downstream consumers resisted building inventories before the holiday and existing inventories have now been used up, spot market trading is expected to improve in the coming week. In general, SMM expects LME zinc prices to move between USD 2,100-2,150/mt in the coming week, but as domestic spot zinc inventories grow, spot zinc prices are expected to hover between RMB 15,400-15,800/mt.