SHANGHAI, Jun. 25 (SMM) – LME zinc prices overnight opened at USD 1,845/mt. As Asia-Pacific stocks markets plummeted across the board and due to concerns over China's liquidity tightness, the Shanghai Composite Index tumbled by 5.3%, falling below 2,000, distressing market sentiment and pulling down commodity prices. LME zinc prices dipped to USD 1,816.3/mt, the second lowest in the year. Many US Federal Reserve officials defended for easing policies, helping ease market concerns. LME zinc price declines slowed, finding support at USD 1,820/mt, dipping to USD 1,812/mt, and finally closing at USD 1,822.5/mt, down USD 27.5/mt, or 1.49%. Trading volumes decreased by 2,053 lots, to 10,726 lots, and total positions decreased by 779 lots, to 264,845 lots. LME zinc inventories fell by 5,575 mt, to 1,065,850 mt.
"Money shortage" in China is the single largest reason behind the slump in financial markets yesterday. The Monetary Policy Committee of the People's Bank of China (PBOC) held its 2Q conference for 2013. According to the conference, liquidity in China's banking system is now within rational level and the PBOC will continue its prudent monetary policy, quashing hopes of further easing monetary policy. This, coupled with brief banking system failure in Bank of China and Industrial and Commercial Bank of China, triggered concerns over liquidity crunch in China and panic sell-off among investors. As a consequence, China's A-shares plummeted 5.30%, with shares in financial and real estate sectors suffering the biggest losses. Goldman Sachs cut its forecast for China's GDP growth in 2013 from 7.8% to 7.4%.
Minneapolis Federal Reserve President Narayana Kocherlakota said Monday that financial markets are wrong to view the Federal Reserve as having become more hawkish in its views on the need to tighten monetary policy, weighing down the US dollar index somewhat. Finance ministers failed to agree on common European Union rules for winding down troubled banks after more than 12 hours of talks that ran into Saturday's early hours, with no consensus reached over the issue of bearing bank losses. The ministers agreed to reconvene Wednesday in a further bid to thrash out a deal. EU Summit will be held on Thursday.
European and US stocks suffered heavy losses. LME base metals closed down across the board.
LME zinc prices will move between USD 1,810-1,840/mt today, and SHFE 1310 zinc contract prices should fluctuate between RMB 14,200-14,300/mt, with spot premiums against SHFE 1309 zinc contract prices between RMB 90-130/mt.