SMM Zinc Market Morning Review (2013-7-19)

SHANGHAI, Jul. 19 (SMM) – LME zinc prices overnight opened at USD 1,860.3/mt. The market continued to absorb Ben Bernanke’s statement, with the US dollar index climbing to break through 83. Prices of new homes in 63 of 70 large and medium-sized Chinese cities rose in June from May vs 65 in May. The property market has been sluggish, and government officials expressed their resolution to adjust industry structure. Demand for zinc shrank, increasing short momentum, pushing down LME zinc prices to find support at USD 1,850/mt, dipping to USD 1,846.3/mt. Both US initial jobless claims and Federal Reserve Bank of Philadelphia’s manufacturing index were positive, boosting US stocks to close with gains, with Standard & Poor’s 500 Index hitting record highs. In this context, LME zinc prices rallied and finally closed at USD 1,861/mt, up USD 0.8/mt or 0.04%.

Trading volumes decreased by 2,056 lots, to 8,247 lots, and total positions decreased by 548 lots, to 250,006 lots. LME zinc inventories fell by 1,600 mt, to 1,075,625 mt.

US Labor Department announced July 18 that the number of initial jobless claims for the week decreased by 24,000, to 334,000, lower than the 345,000 expected, and employment data also improved significantly. Besides, Federal Reserve Bank of Philadelphia’s manufacturing index in July was also much better than expectations, hitting 19.8, its largest growth since 2003. US manufacturing is recovering rapidly, and is expected to be a major force boosting US economic growth and job market. In this context, the US dollar index was pushed up, while non-US dollar currencies generally dropped. But US Conference Board leading indicator was 0.0%, lower than the 0.3% expected, and recent consumption data also shows US consumption growth is slowing, which caused many investment banks to lower US GDP growth expectations significantly.
The survey results released by the Bruges Group showed that 71% of respondents supported UK membership of EFTA. Most English hope to exit EU because 60% supervision and GBP 3 billion will be saved. UK can also negotiate with countries outside EU on free trade agreement. German Finance Minister Wolfgang Schaeuble expressed Greece should stop lobbying regarding its debt restructuring. News from euro zone did not affect the market significantly.

The NBS shows home prices in 68 of 70 large and medium-sized Chinese cities rose in June YoY, and prices in only two cities fell. The largest YoY growth in June was 14.1%, and increases in 11 were smaller than May.

LME base metals prices rose across the board; LIFFE gold and silver prices rose by 0.68% and 0.42%, respectively. Standard & Poor’s 500 Index, the Dow Jones Industrial Average and Nasdaq Composite Index continued to hit record highs. Germany’s June PPI is expected to fall, while annualized PPI will rise.

LME zinc prices will move between USD 1,845-1,870/mt today, and SHFE 1310 zinc contract prices should fluctuate between RMB 14,480-14,580/mt, with spot premiums against SHFE 1309 zinc contract prices expanding to RMB 90-130/mt.