SHANGHAI, Mar. 27 (SMM) -- SHFE three-month zinc contract prices moved narrowly between RMB 15,600-15,650/mt in the morning session after opening slightly higher at RMB 15,640/mt on Monday. The US dollar index strengthened strongly in the midday, pushing LME zinc prices down. As a result, SHFE three-month zinc contract prices plummeted below RMB 15,500/mt in the afternoon session and faced strong short selling pressures at the end of trading, with prices finally closing at RMB 15,490/mt, down RMB 90/mt.
In the spot market, #0 zinc was traded near RMB 15,400/mt at discounts between RMB 240-260/mt against SHFE three-month zinc contract prices, while #1 zinc was traded between RMB 15,300-15,350/mt at discounts of around RMB 320/mt, with most deals made at the low-end. Downstream buying was muted, with transactions only made between traders. As SHFE zinc prices plummeted in the afternoon, spot discounts narrowed rapidly to near RMB 200/mt, but lower prices failed to boost market buying, with downstream consumers showing little buying interest due to a lack of confidence in future zinc prices.
With regard to zinc price trends this week, 60% market players believe SHFE three-month zinc contract prices should remain fluctuating between RMB 15,600-15,800/mt. Despite Greek problem has eased, the manufacturing industry barely boosted demand for metal. Mixed US home sales data and fluctuating US dollar index will allow LME zinc prices to fluctuate between USD 2,010-2,070/mt in the coming week.
Domestic loosening credit policies and deposit reserve ratio cut are expected. But the market lacks orders and downstream demand given easing cash flow problems. Zinc prices will barely rise but drop limitedly. SHFE three-month zinc contract prices should move between RMB 15,600-15,800/mt, with spot discounts between RMB 300-400/mt.
30% of market players believe SHFE three-month zinc contract prices should move between RMB 15,800-16,000/mt. Despite disappointing PMI in euro zone and China, favorable US employment data enhanced market confidence. The market is expecting improving consumption, believing demand grew as inventories on the SHFE have fallen for two consecutive weeks. LME zinc prices are expected to move between USD 2,070-2,100/mt. Spot discounts will expand to RMB 350-450/mt.
The remaining 10% believe SHFE three-month zinc contract prices should move between RMB 15,400-15,600/mt. concerns improved due to negative PMI, with weak consumption this year. Spot prices were weighed down given LME zinc inventories a high 890,000. Cash flow problems at the end of the month kept transactions quiet. As a result, LME zinc prices should fall between USD 1,980-2,010/mt. Spot discounts will narrow to RMB 250-350/mt.