SMM Zinc Market Morning Review (2013-7-16)

SHANGHAI, Jul. 16 (SMM) – LME zinc prices overnight opened at USD 1,898/mt. China's Q2 GDP recorded 7.5%, in line with market expectations, and helping ease market concerns. A-shares led increases of Asian stocks, supporting LME zinc prices to hover between USD 1,890-1,900/mt. US economic data released overnight was mixed, with June sales data sliding more sharply than expected, and causing many investment banks to lower US Q2 GDP growth expectations. In this context, LME zinc prices fell back to USD 1,890/mt, and finally closed at USD 1,890/mt, down USD 5.3/mt, or 0.28%.

Trading volumes decreased by 648 lots, to 5,717 lots, and total positions decreased by 1,350 lots, to 259,493 lots. LME zinc inventories fell by 5,850 mt, to 1,002,650 mt.

China's Q2 GDP released during Asian trading hours rose by 7.5% YoY, in line with market expectations, briefly supporting Asian stocks to rise, but falling at noon due to market concerns over slowing China's economic growth. 5.9 percentage points of growth were contributed by investments, much higher than the 2.3 percentage points in Q1, triggering concerns that China is adjusting economic structure so that economic growth sustainability will decrease. JP Morgan and Nomura also lowered China's GDP growth expectations this year.

A series of negative news was reported from Europe and US. Fitch downgraded the rating of (European Financial Stability Facility) EFSF from AAA, to AA+, as French credit rating was downgraded recently; US June retail sales were 0.4%, lower than 0.7% expected and 0.6% in May. Many investment banks lowered expectations for US Q2 GDP growth, but as New York Fed's manufacturing index in July hit a 5-month high and due to positive earnings report of Citibank, US stocks continued to rise.

US stocks rose, and Standard & Poor's 500 index hit a new high; LME base metals prices generally dropped, with LME aluminum and tin leading declines.

LME zinc prices will move between USD 1,875-1,900/mt today, and SHFE 1310 zinc contract prices should fluctuate between RMB 14,600-14,700/mt, with spot premiums against SHFE 1309 zinc contract prices between RMB 70-110/mt.