Shanghai, May 29 (SMM) – SHFE 1209 zinc prices, the most actively-traded contract opened higher at RMB 14,950/mt on Monday. The falling dollar helped boost SHFE zinc prices in the morning session. Supported by rising Chinese stocks, SHFE three-month zinc contract prices moved between RMB 14,955-15,000/mt in the afternoon session, feeling strong resistance to climb above the RMB 15,000/mt mark. Finally, SHFE 1209 zinc contract prices closed a t RMB 15,000/mt, up RMB 250/mt or 1.69%. Trading volumes were up 39,962 lots to 103,570 lots, and positions were up 6,764 lots to 153,190 lots.
In the spot market, spot discounts of 0# zinc were between RMB 120-130/mt over SHFE 1209 zinc contract prices, and deals were concluded in the RMB 14,770-14,810/mt range. Quotations for 1# zinc were RMB 14,750-14,770/mt. With SHFE zinc prices rising at the midday, 0# zinc was traded between RMB 14,800-14,830/mt, while traded prices for #1 zinc were unchanged. On Monday, zinc smelters remained unwilling to move goods, and trading goods in the market were mainly supplied by traders. Rising zinc prices caused spot discounts to increase, opening no room for hedged goods to flow into market. Downstream producers remained wary of purchases, leaving overall trading quiet.
Both LME and SHFE zinc prices hit new lows and rebounded last week. The followings are the SMM survey results of price movements this week.
33% of market players believe SHFE 1209 zinc contract prices should rise to RMB 15,000-15,200/mt. Whether Greece will remain part of the euro zone is still dominating the market. Non-official support for conservation parties is higher than the left wing alliance, easing market concerns. Besides, CCI in Germany and France improved, allowing the US dollar index to fall after hitting a record high for the year. In this context, LME zinc prices should move between USD 1,920-1,930/mt. The State Council will start a batch of significant projects, and were examined and approved more rapidly than last year. The market is expecting the commencement of a new RMB 4 trillion of stimulus plan, boosting market confidence. In this context, SHFE 1209 zinc contract prices should rise to RMB 15,000-15,200/mt, with spot discounts between RMB 100-150/mt.
50% market players believe SHFE zinc prices should resist both increases and declines. The market will remain cautious ahead of the result of Greece’s general election. Spain’s richest municipality asked for financing support from the government, pushing down the euro. Investors should buy risk adverse assets. In this scenario, LME zinc prices should move between USD 1,900-1,920/mt. domestic zinc prices have been falling since early May, while smelters were holding goods, keeping inventories high. Besides, smelters will likely sell off goods to generate cash at the end of the month. In this context, SHFE 1209 zinc contract prices should move between RMB 14,800-15,000/mt, with spot discounts narrowing to RMB 80-100/mt.
The remaining 17% believe zinc prices should fall further. As Greece’s general election is going to take place, while Spain’s and Italy’s government bond yields are high, market concerns are expected to grow, pushing up the US dollar index. LME zinc prices should dip to USD 1,860-1,900/mt. As domestic downstream consumption weakened, and due to power restrictions implemented in the coastal regions, downstream consumption will further contract. On the other hand, the SHFE/LME zinc price ratio was favorable in April, causing large numbers of inquiries and purchases, which will be delivered in June and July. Domestic spot markets should further pushed down in response. As a result, SHFE 1209 zinc contract prices should fall to RMB 14,600-14,800/mt, with spot discounts between RMB 50-80/mt.