SMM Zinc Market Daily Review (2013-2-5)

SHANGHAI, Feb. 6 (SMM) – In China's domestic markets, the most active SHFE 1305 zinc contract started RMB 95/mt down at RMB 16,100/mt, and basically hovered around the 5-day moving average in the morning. In the afternoon, despite rising Chinese A-shares, SHFE zinc prices drifted down and dipped to RMB 15,960/mt, as LME zinc prices continued the losing streak, and since short investors began to exert more selling pressures. SHFE 1305 zinc contract closed RMB 210/mt or 1.3% lower at RMB 15,985/mt, with trading volumes down 8,288 lots to 129,222 lots, and positions down 8,686 lots to 173,770 lots. Both long and short investors kept cautious during the day. SMM believes that SHFE zinc prices are likely to fall to RMB 15,850/mt once losing the RMB 16,000/mt point for the immediate future.

In spot markets, with SHFE zinc prices slipping noticeably, discounts of #0 zinc against SHFE 1305 zinc contract prices shrank to RMB 370-390/mt, with traded prices largely between RMB 15,650-15,670/mt. In the afternoon, as SHFE zinc prices trended down, traded prices for #0 zinc were RMB 15,570-15,580/mt. Discounts narrowed slightly as some hedged zinc flew out of markets, but traders expressed low buying interest with the Chinese New Year holiday drawing near. Downstream consumers also refrained from purchasing at highs, resulting in muted market activity during the day, although some cargo-holders in the afternoon raised discounts to around RMB 400/mt.