SMM Zinc Market Morning Review (2013-6-6)

SHANGHAI, Jun. 6 (SMM) – LME zinc prices overnight opened at USD 1,952/mt, but plunged to USD 1,939.5/mt as large numbers of longs closed positions. LME zinc prices rallied at noon, but the sluggish US ADP data decreased optimistic expectations of non-farm employment data, causing global stocks markets to plummet and triggering market concerns. In this context, LME zinc prices rolled back early gains and closed at USD 1,951.3/mt, down USD 2.5/mt or 0.13%. Trading volumes increased by 137 lots, to 12,057 lots, and total positions decreased by 4,832 lots, to 258,400 lots. LME zinc inventories fell by 5,275 mt, to 1,077,050 mt.

US economic data released overnight was mixed. The number of US May ADP employment increased by 135,000, lower than expectations, with 138,000 contributed by the servicing sector, and with a decline of 3,000 in the manufacturing. US ISM non-manufacturing index in May improved from 53.1, to 53.7. The job market grew slowly due mainly to fiscal problems after US tax rate increase and government spending cuts. Investors' optimism towards the non-farm employment data decreased due to the sluggish ADP data, so base metals prices lost early gains.

PMIs in May in Italy, Germany and euro zone were all below expectations, with French PMI level with expectations, and UK PMI was better than forecast at 54.9. Euro zone revised Q1 GDP was also worse than forecasts, causing concerns of euro zone economic outlook, and dragging down European stocks markets. European central bank will decide its interest rate today.

Japanese Prime Minister Shinzo Abe unveiled the third arrow of Abe's "three arrow" strategy, including 10 reform measures. But the reforms lack details and power, and was below market expectations. The Nikkei thus plunged by 3.83%.

HSBC's May manufacturing PMI for China was 51.2, topping expectations, and the second lowest in 21 months. HSBC's May PMI for China was 50.9, the lowest since October 2012. China will face downturn risk in Q2 due to sluggish manufacturing and service.

LME zinc prices will move between USD 1,930-1,960/mt today, and SHFE 1309 zinc contract prices should fluctuate between RMB 14,790-14,910/mt, with spot prices ranging from RMB 20/mt below or RMB 30/mt above SHFE 1309 zinc contract price.