SHANGHAI, Feb. 19 (SMM) – With low market confidence, the most active SHFE 1305 zinc contract started slightly down at RMB 15,880/mt Monday and hovered around RMB 15,865/mt. However, SHFE zinc prices slid all the way in the morning as the Shanghai Composite Index closed at 2,421.56 and saw a decline of 0.45% during the day. SHFE zinc prices struggled around RMB 15,785/mt in the afternoon and suffered growing short selling at the tail of trading. Hence, SHFE 1305 zinc contract dipped further and settled RMB 175/mt or 1.10% lower at RMB 15,750/mt.
In spot markets, traded prices for #0 zinc were largely between RMB 15,500-15,560/mt, with discounts over the 1305 SHFE zinc contract shrinking to RMB 290-300/mt. In the afternoon, as the most active SHFE zinc contract moved around RMB 15,785/mt, traded prices for #0 zinc were mainly around RMB 15,500/mt. However, trading for #1 zinc was muted, with traded prices seen around RMB 15,450/mt. Most downstream consumers have yet to resume production, so overall market activity remained relatively lackluster.
SMM conducted a survey concerning zinc price trend this week.
According to the survey, 50% of market insiders anticipate zinc prices will fluctuate at current levels this week. LME zinc will come under pressure at USD 2,200/mt and move between USD 2,150-2,200/mt, and SHFE 1305 zinc contract will hover in a range of RMB 15,700-15,900/mt. Spot zinc discounts against SHFE 1305 zinc contract are likely to narrow to RMB 250-300/mt. The Fed, UK's central bank, Japan's central bank and Reserve Bank of Australia will all release minutes of their policy meetings this week. With recent US economic data improving further, the Fed may exit stimulus measures ahead of time. As the latest inflation report showed the UK's economy will remain weak over the short term, the country's central bank may continue to stress the support for more stimulus measures. The minutes of these central banks' meetings will affect market sentiment and guide zinc price movement. Furthermore, zinc prices may gain support from the US CPI data for January and preliminary manufacturing PMI data out of China, the euro zone, Germany and the US for February due this Thursday. In China's domestic markets, China's imports were RMB 2.17 trillion in January, and the social financing scale for January also hit a historical high. Besides, investors will gradually get back to markets following the Chinese New Year holiday, which will boost market activity. Taken together, zinc prices should hold flat this week.
Nevertheless, the remaining 50% of insiders expect zinc prices to fall slightly this week. LME zinc will look for support at around USD 2,140/mt and SHFE zinc will test support at RMB 15,700/mt. Shanghai spot zinc discounts will hold around RMB 300/mt. LME zinc stocks hovered around a high of 1.19 million mt recently, while the US dollar index climbed above 80.5. In China's domestic markets, market participants have expressed low interest in trading during the first week following the holiday. Downstream consumers reported low operating rate in the face of thin orders. In addition, technical indicator KDJ for SHFE zinc is pointing downside. As such, these market insiders hold the view that zinc prices will edge down this week.