SHANGHAI, Apr. 2 (SMM) – Major domestic cities released detailed regulations to the property market, weighing down zinc prices somewhat. SHFE 1306 zinc contract prices opened at RMB 14,705/mt today. As both official and HSBC’s PMI for China fell short of expectations, the Shanghai Composite Index closed down 0.1%.SHFE zinc prices dipped to RMB 14,600/mt after opening, and then fluctuated between RMB 14,640-14,660/mt during the day, and finally closed at RMB 14,610/mt, down RMB 160/mt or 1.08%. Trading volumes increased by 2,470 lots, to 27,450 lots, and total positions decreased by 3,572 lots to 115,222 lots. Trading volumes of SHFE 1307 zinc contracts increased by 22,340 lots, to 64,440 lots, and total positions increased by 10,720 lots, to 107,706 lots, the contract may become the most actively traded contract tomorrow.
SHFE 1306 zinc contract prices opened low and then fluctuated weakly as China's March PMI fell short of expectations. Discounts of #0 zinc against SHFE 1306 zinc contract prices were RMB 80-100/mt, with traded prices between RMB 14,540-14,570/mt. #1 zinc prices were RMB 14,520-14,530/mt. traders were cautious as SHFE zinc prices lacked directions from the LME market due to its closure. Downstream buying interest improved due to sufficient cash flows, but most purchased modestly, so overall transactions did not improve.
Zinc prices plunged due to growing Cyprus debt crisis as well as Italy’s political turmoil.
With regard to zinc price trends this week, 60% of market players surveyed by SMM believe zinc price should fluctuate weakly, with declines narrowing. LME zinc prices should move between USD 1,850-1,910/mt, and SHFE 1306 zinc contract prices should move between RMB 14,550-14,700/mt, with spot discounts between RMB 70-120/mt. The Reserve Bank of Australia, Bank of Japan, European central bank and Bank of UK will hold interest rate meeting for April this week. Currency is expected to rebound slightly, and European central bank President Mario Draghi’s statement will be a focus of markets. Situations in Cyprus stabilized after its banking sector reopened last week, and market concerns also eased. In the US, major economic data released last week was much better than forecasts, but the market was rarely affected due to the closure of LME. US will release its March non-farm and ISM manufacturing data this week, which are optimistic, and this will given strong supports to US stocks and zinc prices. By last Thursday, LME zinc inventories had fallen for eight consecutive days by nearly 30,000 mt, which will boost market confidence.
Downstream buyers will replenish stocks ahead of the Qingming Festival in China, and will give support to zinc prices, with spot discounts expected to narrow to RMB 70-120/mt.
40% market players believe zinc prices should extend declines due to ongoing European debt crisis. LME zinc prices should test RMB 1,812.5/mt, and SHFE 1306 zinc contract prices will point towards RMB 14,450/mt, with spot discounts against SHFE 1306 zinc contract prices narrowing to RMB 50-70/mt. March PMI from China, Europe and US will be released this week. China’s PMI released Monday morning fell short of forecasts, pushing down SHFE zinc prices. PMI from euro zone will be released on Tuesday morning, and if the data turns out to be negative, zinc prices should be weighed down further. Besides, Italy’s failure in forming a cabinet will continue to dominate the market. Due to political uncertainty, Moody’s plans to downgrade Italy’s sovereign rating, and political deadlock in Italy will also depress investor sentiment, which will weigh down zinc prices. Mixed attitude of US Federal Reserve officials towards QE3 policies will also enlarge zinc price fluctuation ranges.
Major domestic cities released detailed regulations to the property markets last weekend, which maintains major contents of national regulations. Transactions of second-hand houses soared after the 20% personal taxing was release, and once local regulations take effect, local second-hand house transactions will cool down, and the new home market will also rationalize. The LME market has been closed over the past two days, but positions on the SHFE market did not decrease sharply despite a lack of directions from the LME market. In domestic spot markets, downstream buying interest is low due to sluggish orders, so transactions will not improve.