SHANGHAI, Feb. 6 (SMM) – LME zinc prices started at USD 2,177/mt on Tuesday, but were dragged down to an intraday trough of USD 2,158.5/mt as the US dollar index advanced above 79.75. However, with support at the 5-day moving average, LME zinc prices began rebounding after stagnating at lows temporarily. In the evening, the US President Obama urged the Congress to formulate a plan as soon as possible to avoid automatic spending cuts set to hit on March 1, which helped US equity markets close higher across the board. The US dollar, though, slid below its 5-day moving average. LME zinc prices took the opportunity to climb to USD 2,187/mt before settling USD 0.8/mt higher at USD 2,179.8/mt. LME zinc stocks decreased by 2,375 mt to 1,199,675 mt.

With the macro news front improving, SMM believes that LME zinc will stabilize at the 5-day moving average on Wednesday, with prices between USD 2,165-2,200/mt. The most active SHFE 1305 zinc contracts are likely to stop falling and experience small gains, with prices between RMB 15,980-16,200/mt. Shanghai spot zinc market activity will remain muted as discounts against SHFE 1305 zinc contracts are expected between RMB 390-420/mt.