SMM Zinc Market Morning Review (2013-7-5)

SHANGHAI, Jul. 5 (SMM) – LME zinc prices overnight opened at USD 1,879/mt, and fluctuated weakly between 1,865-1,875/mt as investors operated cautiously. European central bank and Bank of UK maintained existing interest rate and debt purchasing scale unchanged, but expectations of additional easing policy pushed down the euro and the pound to plunge, distressing market sentiment and weighing down LME zinc prices to lose the 5, 30 and 60-day moving average. Due to the US Independence Day holiday, LME zinc prices dipped to USD 1,857.8/mt, and finally closed at USD 1,860/mt, down USD 15.3/mt or 0.81%. Trading volumes decreased by 5,228 lots, to 5,200 lots, and total positions decreased by 5,324 lots, to 264,397 lots. LME zinc inventories fell by 5,250 mt, to 1,038,450 mt. The US dollar index opened high and moved higher due to expectations of easing policies, pointing towards 84, weighing down zinc prices.

European currencies weakened as Bank of UK and European Central Bank expressed they will use easing policies after interest rate announcement. The Bank of UK maintained interest rates and QE scale unchanged, expressing the inflation rate  will likely fall to the 2% target, and concerning rising interest rates will hit economic recovery; European Central Bank also maintained re-financing interest rates, deposit interest rates and loan interest rates unchanged at 0.5%, 0% and 1% respectively, reiterating it is open for negative interest rates, pushing up the US dollar index by 0.5.

China's Ministry of Finance (MOF) decided to implement national treasury cash management commercial bank fixed term deposit (the fourth and fifth) totaling RMB 100 billion. Nearly RMB 400 billion deposit reserve will be drained from the market, and RMB 300 billion will be withdrawn in July. The move by the MOF will help ease liquidity tightness.

US financial markets were closed, and major European stocks generally rose by 2%; LME base metals prices dropped.

LME zinc prices will move between USD 1,850-1,875/mt today, and SHFE 1310 zinc contract prices should fluctuate between RMB 14,460-14,580/mt, with spot premiums against SHFE 1309 zinc contract prices between RMB 80-110/mt.