SHANGHAI, Jul. 16 (SMM) - SHFE 1310 zinc contract prices opened slightly lower at RMB 14,680/mt. China's Q2 GDP was 7.5%, coinciding market expectations, and helping ease market concerns. A-shares opened low but moved higher, closing the day up 0.98%. Pushed up by a large number of longs, SHFE 1310 zinc contract prices edged up to RMB 14,710/mt. LME zinc prices failed to break through USD 1,900/mt, falling back to the 5-day moving average, dragging down SHFE zinc prices to RMB 14,660/mt, and finally closing at RMB 14,690/mt. Trading volumes decreased by 12,788 lots, to 33,194 lots, and total positions decreased by 3,176 lots, to 151,056 lots.
#0 zinc prices were between RMB 14,760-14,790/mt, with spot premiums of RMB 70-90/mt against SHFE 1310 zinc contract prices. #1 zinc prices were between RMB 14,730-14,740/mt, with imported #0 zinc prices between RMB 14,750-14,760/mt. SHFE zinc prices opened low but moved higher, with #0 zinc prices remaining around RMB 14,750/mt, their highest since mid-June. Smelters unwillingness to sell goods eased, but downstream buyers only purchased as needed, with transactions muted. SHFE zinc prices dropped in the afternoon, with #0 zinc prices between RMB 14,760-14,780/mt, and spot premiums of RMB 80-100/mt against SHFE 1310 zinc contract prices.
Ben Bernanke expressed his support to continue easing policies, so the US dollar index plunged due to selloffs, giving support to zinc prices. Will zinc prices extend increases this week?
A most recent SMM survey shows 60% market participants are neutral towards zinc prices, believing LME zinc prices will not break through USD 1,900/mt level, and SHFE 1310 zinc contract prices will move between RMB 14,600-14,800/mt, with spot premiums between RMB 50-90/mt. Many countries will release June PPI on Tuesday, and Bank of Japan will announce June interest rate meeting minutes on Wednesday, and Bank of UK's July meeting minutes will be announced. Bank of Canada's July interest rate decision and Bernanke's testimony before the congress will also be made on Wednesday. China announced its June sales data, industry production figures and Q2 GDP on Monday. Q2 GDP recorded 7.5%, in line with market expectations, which is acceptable and helped ease market concerns. China's liquidity crunch eased in July, and cash flow problems at smelters also mitigated. Given low zinc prices, smelters held back goods again, leading to tightness or shortfalls of some brands, particularly in Tianjin, which will give support to spot zinc prices.
40% believe LME zinc prices will test USD 1,850/mt, and SHFE 1310 zinc contact prices will fall back to RMB 14,400-14,500/mt, with spot premiums around RMB 100/mt. US economic recovery is optimistic, while economic growth in central Europe is still slow. Ratings of Portugal and France were downgraded, weighing down the euro. China's June social power consumption was up 6.3% YoY, with industry power consumption growing slightly on a MoM basis. YTD power consumption through June rose 5.1%, with the growth 0.4% lower, showing a slow industry growth in China. As the low demand season for galvanizing and zinc oxide set in, zinc prices will be weighed down. Transactions of galvanized products improved last week, with prices rising. Ex-works galvanized products prices for August generally rose slightly, but home appliance subsidy was canceled in July. Besides, construction was disrupted by the high temperature, and transactions were mainly made among traders. As such, galvanized products lacked support and will barely rise further, with steel plants purchasing as needed. LME zinc inventories continued to fall by 27,000 mt, but still stood above 1 million mt. SHFE zinc inventories grew by 768 mt, to 275,088 mt. SMM reported inventories in Tianjin, Shanghai and Guangdong fell by 600 mt, with the declines slowing and showing sluggish consumption.