Nearly 40% Zinc Smelters Expect Rally in Zinc Prices in 1Q

SHANGHAI, Feb. 27 (SMM) - Zinc prices rose again following correction in early January, and shot up to the highest in nearly a year in early February. However, zinc prices have slipped into negative territory again recently. SMM’s survey of 36 domestic zinc smelters reveals that 37.5% of smelters surveyed painted a rosy picture of zinc prices following the Chinese New Year, 20% expressed bearish views, and the remaining 40% expected zinc prices to move within tight ranges.   

Bullish smelters believe that stabilizing European economy and positive economic indicators from China and the US have helped trading improve notably from earlier. Besides, as holiday sentiment from the Chinese New Year holiday gradually diminishes, increased liquidity will put base metals markets on a solid footing into post-holiday period. Investors generally expect favorable policies after China’s new leader takes office. In this context, there is still room for zinc prices to rise in 1Q.   

Neutral smelters are worried that upbeat economic figures from China and the US have been digested. In addition, the ongoing general elections in Spain and Italy mean there is still a long way to go before the euro zone can witness economic recovery. As such, these market players are staying cautious about future prices and expect zinc prices to fluctuate within narrow ranges. 

Bearish smelters understand that a persistently firm US dollar has put heavy downward pressure on base metals prices. There is little chance that zinc ingot consumption will pick up significantly since most downstream producers will not resume production until the Lantern Festival and as pre-holiday restocking is sufficient to meet current production. Coupled with growing inventories in trading markets after the week-long holiday, weak fundamentals will continue to keep zinc prices in check.