SHANGHAI, Nov. 18 (SMM) –
The Third Plenary Session of the 18th CPC Central Committee ended last week and did not produce any significant reform policies for industrial sectors, depressing market sentiment. LME zinc prices fell by nearly USD 30/mt, down from USD 1,900/mt, but after the euro rebounded slightly and after US Federal Reserve Chairman nominee Janet Yellen expressed her support for easing policies, LME zinc prices stabilized, but still failed to break through USD 1,900/mt.
SHFE 1402 zinc contracts became the most actively traded contract last Thursday, with prices falling from RMB 14,985/mt in early week trading, down 1.5% to RMB 14,765/mt and tracking LME zinc prices. After the Shanghai Composite Index returned to 2,000, SHFE zinc prices bottomed out and hovered between RMB 14,800-14,840/mt.
Traded prices for #0 zinc moved last Monday between RMB 15,000-15,050/mt, but then fell slightly to RMB 14,900-14,980/mt, with premiums between RMB 80-140/mt. #1 zinc supply continued to fall as well since producers were holding back goods, causing the price spread between #1 and #0 zinc to narrow to RMB 40-50/mt. Traded prices fell from RMB 14,980-14,990/mt early in the week, to RMB 14,870-14,920/mt. Smelters were generally moving goods normally, but traders reported soft demand, keeping overall transactions muted.
Due to soft demand, traded prices in Guangdong were RMB 90-100/mt below Shanghai prices, with the price spread expanding by RMB 20/mt from the previous week. Baiyin Nonferrous Metals suspended production, Honglu branded zinc availability was low, and supply from Dongling was also disrupted by transportation problem, leaving supply in Tianjin tight and keeping prices RMB 20-90/mt above Shanghai prices. Prices for Huludao brand #0 zinc produced by older production lines were cut by RMB 60/mt, to RMB 15,880/mt, while # 0 zinc produced at newer production lines was popular due to tight Dongling and Honglu branded supply, causing the price spread with goods from older production lines to contract to only RMB 170/mt.
US initial jobless claims two weeks ago rose to 339,000, the euro zone 3Q GDP only grew by 0.1%, falling short of forecasts, while major UK economic indicators were also disappointing. However, the nominee to be the next Fed Chairman, Janet Yellen, stated she would keep QE3 in place. The US dollar index leveled out, creating pressure on LME zinc prices, while the Standard & Poor’s 500 Index, Dow Jones Industrial Average, and the Nasdaq Composite Index all continued to hit record highs. This week, LME zinc prices should find some support between USD 1,880-1,920/mt, while SHFE 1402 zinc contract prices will move between RMB 14,800-14,950/mt, with spot premiums of RMB 60-120/mt. Smelters will move goods normally, while downstream buyers will likely purchase on an as-needed basis.