SMM Zinc Weekly Price Review and Forecast (17-21 Jun. 2013)

SHANGHAI, Jun. 7 (SMM) – The market was dominated by short momentum due to expectations that the US Federal Reserve will scale back monetary policies, pushing down LME zinc prices to USD 1,840-1,890/mt. The market was absorbing sluggish economic data during the Chinese holiday, and stocks markets slumped upon reopening, triggering concerns over China's base metals demand.

SHFE zinc prices plunged with LME zinc prices during the two trading days, but were more resistant to declines than LME zinc prices, with the SHFE/LME zinc prices jumping to 8. SHFE 1309 zinc contract prices opened low after reopening, falling below all moving averages, testing RMB 14,500/mt and once dipping to RMB 14,480/mt, rolling back early gains. Trading volumes decreased by 195,000 lots, and total positions increased by 1,994 lots.

In the spot market, #0 zinc prices rose from close to SHFE 1309 zinc contract prices levels to premiums in excess of RMB 100/mt. Prices in Guangdong were flat at SHFE 1309 zinc contract prices before delivery, while spot prices in Shanghai were firm due to limited supply, causing premiums to expand. SMM sources report zinc ingot inventories in Guangdong grew by 2,000 mt, while inventories in Shanghai fell slightly, with the price spread between the two regions widening from RMB 90-100/mt two weeks ago, to RMB 140/mt. Traders stood on the sidelines due to the lack of arbitrage opportunities, and downstream buying interest was low, keeping transactions muted.