SHANGHAI, Oct. 9 (SMM) -- Due to the weak LME zinc prices during the holidays, SHFE 1301 zinc contract prices opened lower on Monday at RMB 15,580/mt. Due to slumping LME zinc prices and the Shanghai Composite Index, SHFE 1301 zinc contract prices fell to RMB 15,500/mt level, and fluctuated between RMB 15,500-15,550/mt during the day. Finally, SHFE 1301 zinc contract prices closed at RMB 15,520/mt, down RMB 220/mt or 1.4%.
In domestic spot markets, spot discounts narrowed due to the falling SHFE zinc prices. Discounts of #0 zinc against SHFE 1301 zinc contract prices narrowed to RMB 260-300/mt, with traded prices between RMB 15,230-15,250/mt. #1 zinc was traded between RMB 15,160-15,180/mt. There were barely quotes for #1 zinc. Downstream inquired actively due to falling zinc prices and the need to replenish stocks, while cargo holders also moved goods actively due to narrowing discounts, causing the overall transactions to improve.
According to a most recent SMM survey, 40% of market players believe SHFE three-month zinc contract prices will fall to RMB 15,200/mt. major US economic data was released during the holidays, and optimism was absorbed. Eurozone problems still plague the market. on the other hand, LME zinc inventories grew to 990,000 mt, pushing down LME zinc prices to USD 2,000/mt level.
In domestic markets, downstream demand did not improve despite the onset of the high demand season. According to an SMM survey, operating rates at smelters will continue to rise in October, with output expected to grow further. With the weak demand and increasing supply, SHFE three-month zinc contract prices should fall to RMB 15,200/mt, with spot discounts narrowing to RMB 220-250/mt.
About 40% investors believe SHFE three-month zinc contract prices should fluctuate around RMB 15,500/mt. Due to the positive US non-farm employment data, the number of US jobless claims to be released this week is optimistic. The US dollar index met strong resistance at 80, so LME zinc prices should struggle at USD 2,050/mt level. Spot prices stood firm following SHFE spot-month zinc contract prices as goods will be delivered this week. SHFE three-month zinc contract prices are expected to fluctuate around RMB 15,500/mt level, with spot discounts between RMB 250-300/mt.
The remaining 20% think zinc prices should stop falling and rebound this week. SHFE three-month zinc contract prices will touch RMB 15,800/mt. LME zinc prices are expected to rebound as they have almost bottomed out during China’s National Day holiday, moving between USD 2,050-2,080/mt. As the 18th National People’s Congress nears, a number of stimulus policies are expected. In this context, SHFE three-month zinc contract prices will stop falling and rise to RMB 15,800/mt, with spot discounts expanding to RMB 300-330/mt. Transactions will improve.