SMM Daily Review - 2012/2/27 Zinc Market

SHANGHAI, Feb. 28 (SMM) -- SHFE three-month zinc contract prices opened slightly higher at RMB 15,950/mt on Monday, with prices mainly moving between RMB 15,900-15,950/mt in the morning session. As LME zinc prices advanced in the midday, SHFE three-month zinc contract prices even climbed to RMB 16,000/mt, but later reversed previous gains and fell back to the daily moving average due to the exit of long investors from the market after profit-taking, with prices finally closing at RMB 15,950/mt, up RMB 110/mt.

In the spot market, #0 zinc was traded between RMB 15,550-15,600/mt, with discounts expanding to RMB 350-380/mt, while discounts for warrants were RMB 300/mt against SHFE three-month zinc contract prices. #1 zinc was traded between RMB 15,500-15,550/mt. Downstream buying was cautious, while markets preferred registered brands or warrants, resulting in brisk trading of warrants.

With regard to zinc price trends this week, most investors believe prices should continue to rise.

60% investors believe SHFE three-month zinc contract prices should continue to rise to RMB 16,300/mt this week. The Shanghai Composite Index well supported SHFE three-month zinc contract prices recently, so prices will stand at RMB 16,000/mt level. As downstream consumers returned to the market, SHFE three-month zinc contract prices should move between RMB 15,800-16,300/mt, with spot discounts expanding to RMB 350-500/mt.

The remaining 40% believe SHFE three-month zinc contract prices should fluctuate between RMB 15,500-16,000/mt. Despite market concerns over Greek debt crisis eased, major economies recover slowly. The NPC and CPPCC are going to take place in March, and the market is awaiting possible macroeconomic news, so commodity prices will not rise significantly. Both SHFE and LME inventories are high, while smelters are actively moving goods at RMB 15,600/mt, so spot prices should resist increases. SHFE three-month zinc contract prices should move between RMB 15,500-16,000/mt, with spot discounts between RMB 300-400/mt.