SMM Zinc Market Morning Review (2013-6-20)

SHANGHAI, Jun. 20 (SMM) – The US Federal Reserve maintained its benchmark rate and monthly assets purchasing unchanged, but increased its outlook for GDP growth in 2014 to 3.0%-3.5%, and lowered unemployment rate to 6.5%-6.8%. Bernanke supported to scale back easing policy by the end of the year, pushing up the US dollar index and weighing down base metals prices, but with LME zinc prices resistant to declines. LME zinc prices overnight opened at USD 1,859/mt, struggling around the 5-day moving average and closing at USD 1,862.8/mt, up USD 5.3/mt or 0.28%. LME zinc prices plummeted to USD 1,850/mt this morning. Trading volumes increased by 1,070 lots, to 8,961 lots, and total positions decreased by 6,826 lots, to 254,000 lots. LME zinc inventories fell by 3,550 mt, to 1,078,025 mt.

The US Federal Reserve announced it will maintain the USD 85 billion/month debt purchasing plan, meaning it will buy USD 45 billion long-term government bonds while purchasing USD 40 billion mortgage backed securities. Meanwhile, federal fund rate was maintained unchanged between 0-0.25%, which passed by a 10-2 vote. Kansas City Fed Chairman George and St. Louis Fed Chairman Bullard voted against the decision, with the former objecting continuous easing monetary policies while the latter suggesting the Fed release additional easing policies. Bernanke hinted at a press conference that the Fed will likely quit QE3 by the year-end if US economic recovery continues. In this context, the US dollar index extended increases, hitting a record high in a month of 81.50; the AUD, NZD, CHF and JPY against the US dollar dropped by over 1%, and the GBP and the euro against the US dollar fell by nearly 1%; US stocks markets extended declines, with the Dow Jones Industrial Average sliding by 1.01%, and Standard & Poor's 500 Index falling by 1.01%.

The IMF released the Spanish Economic Assessment Report, stating Spain's economic imbalance eased, but as the outlook is still severe, the country should take more actions to boost economic growth and increase jobs. Cyprus President expressed in a letter to euro zone leaders and the country's creditors that strict aid requirements by international creditors pushed the country to recession, and hoped the aid details will be revised. But three euro zone officials said yesterday they have no intend to change the aid clause.

Chinese Premier Li Keqiang held an executive meeting of the State Council on June 19 to eliminate and delegate 32 administrative examination and approval items, pushing pilot work of personal investment overseas. The meeting shows domestic economic structural reform was commenced.

HSBC's June PMI for China will be released today, which is pessimistic and will further weigh down base metals prices. US initial (continued) jobless claims last week, existing home sales and Federal Reserve Bank of Philadelphia's June manufacturing index will be announced, which are optimistic and expected to boost base metals prices.

LME zinc prices will move between USD 1,835-1,860/mt today, and SHFE 1309 zinc contract prices should fluctuate between RMB 14,400-14,500/mt, with spot premiums against SHFE 1309 zinc contract prices expanding to RMB 110-160/mt.