SHANGHAI, Feb. 21 (SMM) -- SHFE three-month zinc contract prices briefly climbed to hit RMB 15,790/mt after opening slightly higher at RMB 15,655/mt boosted by the People’s Bank of China’s announcement to cut the banks’ reserve requirement ratio last Saturday, with prices later falling gradually due to the exit of long investors from the market. As the Shanghai Composite Index advanced in the midday, SHFE three-month zinc contract prices tried to reverse previous losses, but slipped after only breaking through the daily moving average, with prices finally closing at RMB 15,605/mt, down RMB 50/mt.  

In the spot market, #0 zinc was traded at RMB 15,400/mt, with discounts between RMB 250-270/mt against SHFE three-month zinc contract prices, while #1 zinc was traded between RMB 15,300-15,350/mt, with discounts of RMB 300/mt. Downstream buying interest remained strong, but transaction volumes were limited as SHFE zinc prices lacked upward momentum.

China’s central bank announced to cut deposit reserve ratio last Saturday, but the market did not give active response on Monday. SHFE three-month zinc contract prices inched down after opening.

With regard to zinc price trends this week, 70% market players believe SHFE three-month zinc contract prices should remain fluctuating, meeting resistance at RMB 16,000/mt but finding support at RMB 15,300/mt. SHFE three-month zinc contract prices plunged after opening higher, fluctuating around the 30-day moving average. The market remained cautious as euro zone finance ministers’ meeting made a decision on the second bailout plan for Greece. LME zinc prices rose to USD 2,200/mt but resisted increases as a large number of investors left the market with profit-taking. The market appreciate China will not actually loosen monetary policies. In this context, SHFE three-month zinc contract prices resisted increases at RMB 16,000/mt. inventories surged after the holiday, weighing down spot prices. On the other hand, downstream enterprises have restarted production, but are unwilling to purchase at RMB 15,500/mt, so zinc prices lack support. As a result, SHFE three-month zinc contract prices should remain between RMB 15,300-16,000/mt, with spot discounts between RMB 200-300/mt.

20% market players think SHFE three-month zinc contract prices should stand at RMB 16,000/mt. Euro zone finance ministers’ meeting made a decision on the second bailout plan for Greece on Monday, and Greece has finished credit tightening policies, while China’s leaders said China will aid Europe, causing market confidence to improve. Increasing consumption will support SHFE zinc prices. In this context, SHFE three-month zinc contract prices should stand at RMB 16,000/mt, with spot discounts between RMB 300-400/mt.

Only 10% market players think SHFE three-month zinc contract prices should dip. LME zinc prices are expected to fall as European debt will due in a few months, while the US dollar index should continue to rise. LME zinc prices should fall to USD 1,900/mt. Smelters have been actively moving goods to generate cash given high inventories, keeping spot discounts unchanged. SHFE three-month zinc contract prices should fall to test RMB 15,000/mt, with spot discounts between RMB 200-300/mt.