SHANGHAI, Oct. 15 (SMM) - US will default if it fails to raise debt ceiling before October 17, with market wariness prevailing in the market. SHFE 1401 zinc contract prices opened at RMB 14,960/mt, soaring immediately following opening but dropping back later, hitting a daily low of RMB 14,885/mt. SHFE zinc prices edged up as bargain hunters entered the market, rallying to the opening price. China's September CPI rose 0.8% MoM, and up 0.8% YoY; PPI rose by 0.2% MoM, but down 1.3% YoY. Narrower declines show demand improved, giving support to zinc prices. SHFE zinc prices touched RMB 14,995/mt, and closed at RMB 14,980/mt, up RMB 50/mt or 0.33%. Trading volumes decreased by 30,322 lots, to 43,832 lots, and total positions increased by 4,244 lots, to 149,166 lots.
#0 zinc prices were between RMB 15,050-15,110/mt, with spot premiums of RMB 100-150/mt against SHFE 1401 zinc contract prices. #1 zinc prices were between RMB 15,000-15,010/mt, and Belgium #0 zinc prices were between RMB 14,990-15,030/mt. SHFE 1401 zinc contract prices fluctuated in a wider range, up from last Friday's levels. Cargo holders were holding prices firm, with spot premiums expanding. Shuangyan branded #0 zinc prices were between RMB 15,080-15,110/mt, and Jiulong and Qinxin branded #0 zinc prices were between RMB 15,050-15,080/mt, with premiums of Belgium #0 zinc prices around RMB 40/mt. low imported zinc prices impacted #1 zinc market, with #1 zinc prices around RMB 15,010/mt. Downstream buying interest was low, leaving transactions muted. As SHFE inched down, #0 zinc prices fell to RMB 15,030-15,060/mt, with #1 zinc supply increasing, and prices between RMB 14,970-15,000/mt. Imported #0 zinc prices were between RMB 14,980-15,030/mt. SHFE zinc prices opened high and moved higher, and spot zinc prices rose by RMB 100/mt. Cargo holders moved goods at higher prices, while downstream buying interest was undermined, leaving transactions muted.
US debt ceiling issue refrained zinc price gains last week.
SMM undertook a survey and found that 50% market players are optimistic towards zinc price trends this week, believing LME zinc prices will break through USD 1,935/mt, and test resistance at USD 1,950/mt. SHFE 1401 zinc contract prices will break through USD 15,000/mt, and test pressure at USD 15,300/mt. although US default is likely if it fails to raise debt ceiling before its October 17 deadline, the market is not worried because the debt issue is expected to be resolved at the last moment. Once the US debt ceiling issue is resolved, the market will be positively affected. Meanwhile, the US dollar index has been falling since US debt crisis occurred, which lent some support to base metals prices. China's trade surplus narrowed in September, while imports grew slightly, and exports dropped sharply. A China Customs manager reported China import and export stabilized at low levels during the first three quarters of 2013, and foreign trade dependence degree in 1H was 50.4%, down 0.7 percentage point from the same period last year. China's September CPI rose 0.8% MoM, and up 3.1% YoY; PPI was up 0.2% MoM, but down 1.3% YoY. That shows industry production is stable. China's Q3 GDP, fixed assets investments in cities and towns during January-September and retail sales in September will be released this Friday, which is optimistic and are expected to boost zinc prices.
13.3% are pessimistic. US government remains closed, and the release of non-farm employment data was postponed. ADP showed only 166,000 jobs were added, falling short of expectations and pointing to a sluggish job market. If the US non-farm employment data is released this Friday, they are pessimistic, and will negatively affect zinc prices. LME zinc prices will fall below 10 and 20-day moving average, testing support from USD 1,870/mt. SHFE 1401 zinc contract prices will fall to test support from RMB 14,800/mt. galvanizing and zinc oxide enterprises near Tianjin will not restart until next week due to the ongoing Asian Games. Spot premiums remained high recently, but downstream purchasing was muted. Besides, strict air pollution inspections in Beijing, Tianjin and Hebei will affect galvanizers, and will curb zinc demand. Cargo holders held prices firm early this week, with Shanghai #0 zinc prices up to RMB 15,100/mt, the highest since September, but as SHFE zinc prices inch down, zinc prices are expected to fall below RMB 15,000/mt.
The remaining 36.7% are neutral toward zinc prices. US political impasse will kept investors away from the market. LME zinc prices will hover above the 60-day moving average, and SHFE 1401 zinc contract prices will fluctuate around RMB 14,900/mt, with spot premiums between RMB 100-150/mt and traded prices around RMB 15,000/mt.