SMM Zinc Market Morning Review (2013-7-1)

SHANGHAI, Jul. 1 (SMM) – LME zinc prices last Friday opened at USD 1,846.3/mt, moving between USD 1,845-1,850/mt during Asian trading hours. After Asian trading, both UK home price index and German's retail sales data were upbeat, and US Federal Reserve (Fed) officials eased market concerns, boosting investor risk appetite. LME zinc prices thus climbed to USD 1,850/mt, moving between USD 1,850-1,860/mt, touching USD 1,880.5/mt before falling, and finally closing at USD 1,855/mt, up USD 6/mt or 0.32%. Trading volumes increased by 3,206 lots, to 8,736 lots, and total positions increased by 862 lots, to 266,959 lots. LME zinc inventories grew by 3,775 mt, to 1,061,475 mt.

Fed official Jeremy Stein stated overnight that whether the Fed will quit QE3 will depend on long-term economic progress, rather than near-term economic data, but hinted the Fed will begin to take action in September at the earliest if US economy maintains mild recovery, causing expectations over QE end to grow. In this context, the US dollar index broke through 83, weighing down stocks and base metals prices. But as University of Michigan's June CCI for US hit a record high of 81.4 since July 2007, financial markets were boosted.

After the EU summit ended, the Fitch and Standard & Poor's downgraded Cyprus' credit rating to show negative effects of debt transposition and write-down by the country. But the two rating agencies pointed out that since the country's bond transposition plan underway has not caused substantial effects on the market, its rating will be raised once the bond transposition plan is completed.

China Banking Regulatory Commission President Shang Fulin said at the Lujiazui Forum that the banking sector has been subject to liquidity tightness recently, but the sector actually did not fall short of liquidity. Since liquidity tightness has eased, domestic banking sector will continue to move steadily. But the industry should enhance risk management, structure adjustment and business transformation.

European and US stocks markets dropped except for the Nasdaq Composite Index; LME base metals prices generally rose.

LME zinc prices will move between USD 1,840-1,870/mt today, and SHFE 1310 zinc contract prices should fluctuate between RMB 14,400-14,530/mt, with spot premiums against SHFE 1309 zinc contract prices between RMB 50-90/mt.