SHANGHAI, Oct. 22 (SMM) - SHFE 1401 zinc contract prices opened flat at RMB 14,960/mt, and then edging up after briefly dipping to RMB 14,910/mt. Boosting by rising LME zinc prices and strengthening Shanghai Composite Index, SHFE zinc prices broke through RMB 15,000/mt, then hovering between RMB 15,050-15,080/mt. At the end of trading, the Shanghai Composite Index continued to rise and closed up 1.62%, pushing up SHFE zinc prices to close at a second daily high of RMB 15,115/mt, up RMB 155/mt or 1.04%. Trading volumes increased by 54,960 lots, to 92,234 lots, and total positions increased by 23,580 lots, to 152,598 lots.
#0 zinc prices were between RMB 15,090-15,160/mt, with spot premiums narrowing RMB 50/mt, to RMB 50-100/mt against SHFE 1401 zinc contract prices. #1 zinc prices were between RMB 15,040-15,050/mt. SHFE 1401 zinc contract prices opened flat but strengthened later the day, with both smelters and other cargo holders actively moving goods, causing supply to increase and spot premiums to narrow. A large number of traders entered the market, but downstream buying interest was low, leaving trading muted. Shuangyan and Yuguang branded #0 zinc prices were RMB 15,140-15,160/mt, with Baohui brand #0 zinc prices between RMB 15,090-15,100/mt. Other regular #0 zinc prices were between RMB 15,110-15,130/mt, with spot premiums of SMC #0 zinc against SHFE 1401 zinc contract prices around RMB 50/mt.
An agreement was reached on the US debt ceiling issue, but without further support, LME zinc prices leveled out.
SMM undertook a survey and found that 50% market players are optimistic toward zinc prices this week, believing LME zinc prices till test USD 1,960/mt, and SHFE 1401 zinc contract prices will test RMB 15,300/mt. US September non-farm employment data will be released this Tuesday, if the data fall short of expectations, when combined with worries that US government shutdown will impact economy, the likelihood of QE3 wind-down is very low, which will give support to base metals prices. China's Q3 GDP rose 7.8%, compared to 7.5% in 2Q, showing China's economy is improving. When combined with an agreement on the US debt ceiling issue and US government reopening, market regains confidence. Manufacturing PMIs from China, Eurozone and US in September will also be announced this week, which is optimistic, and will positively affect zinc prices. Galvanizers and zinc oxide producers in and around Tianjin will restart operations after the East Asian Games, which will boost demand in north China, with spot premiums against SHFE 1401 zinc contract prices between RMB 0-50/mt.
7.9% are pessimistic toward zinc prices. Zinc prices have leveled out, although the impasse of US debt ceiling issue broke, the US government is only allowed to open before January 15, 2014. The market worries that will affect US consumption and investment growth. In this context, LME zinc prices will fall to test support from USD 1,900/mt, and SHFE 1401 zinc contract prices will test RMB 14,850/mt, with spot premiums between RMB 100-150/mt.
42.1% take a neutral attitude. Major macroeconomic news is mixed, and global economy lacks ability to recover. In this scenario, the market will unlikely dip or soar, with both longs and shorts taking a wait-and-see attitude. LME zinc prices will move between USD 1,915-1,950/mt, and SHFE 1401 zinc contract prices will hover around RMB 15,000/mt, with spot premiums between RMB 50-100/mt.