Shanghai, May 22 (SMM) – The G-8 leaders last Saturday stressed that Greece should remain in the euro zone, and to comply with its commitment is essential. Supported by the news, SHFE three-month zinc contract prices opened slightly higher at RMB 14,930/mt on Monday, and ended at RMB 14,990/mt after hovering around the RMB 15,000/mt mark for the whole day, up RMB 120/mt or 0.81%. Trading volumes were down 21,414 lots to 95,034 lots, and positions were down 4,938 lots to 161,022 lots.
In the domestic spot market, spot discounts of 0# zinc were RMB 80/mt over SHFE three-month zinc contract, with deals concluded between RMB 14,900-14,930/mt, and quotations for #1 were between RMB 14,850-14,900/mt, but with limited deals. Downstream producers chose to stand on the sidelines, as they doubted SHFE three-month zinc prices will rise above RMB 15,000/mt.
With unstable Greece’s political situation, the euro continued to surge. Both LME and SHFE zinc prices hit new lows for the year.
About 60% of market players believe SHFE three-month zinc contract prices will rise to RMB 15,200/mt this week. At the G8 summit taking place last weekend, the governments are decided to keep Greece in the euro zone, causing market confidence to improve. The US dollar index is expected to fall from 81, and LME zinc prices should rally to USD 1,920-1,950/mt. goods supply available in the market is tight recently, while spot discounts remained low. On the other hand, many smelters plan to conduct maintenance in May or June, with spot output expected to fall further, giving support to zinc prices. SHFE three-month zinc contract prices should rally to RMB 15,000-15,300/mt this week, with spot discounts between RMB 100-120/mt.
40% believe zinc prices should stop falling but barely rebound. Despite the G8 summit hopes to keep Greece in the euro zone, massive funds will be needed to help Greece. On the other hand, slow economic recovery in the euro zone kept its consumption ability weak, with LME zinc inventories 840,000 mt. In this context, LME zinc prices should move between USD 1,890-1,920/mt. Despite Premier Wen Jiabao emphasized pre-adjustment and growth stability, relative measures will not affect downstream industries in the short term. Downstream purchasing did not improve in 2Q, while the seasonal low demand period nears. Besides, zinc imported previously by arbitrager will arrive in June and July. In this context, SHFE three-month zinc contract prices should move between RMB 14,800-15,000/mt, with spot discounts between RMB 80-100/mt.