SHANGHAI, Nov. 26 (SMM) – SHFE 1402 zinc contract prices opened higher at RMB 14,900/mt, as LME zinc prices rose by 1% last Friday, but then rolled back early gains, touching as high as RMB 14,920/mt, with strong resistance at the 60-day moving average. Both LME zinc prices and the Shanghai Composite Index fell later the day, dragging down SHFE zinc prices to fall, closing the day at RMB 14,830/mt, up RMB 10/mt. Trading volumes increased by 1,920 lots, to 19,732 lots, and total positions decreased by 430 lots, to 115,000 lots.
#0 zinc prices were between RMB 14,930-14,970/mt, with spot premiums between RMB 60-100/mt against SHFE 1402 zinc contract prices. Lida branded #1 zinc prices were around RMB 14,890/mt, with Belgian and Mexican #0 zinc prices around RMB 14,900/mt, and spot premiums of KZ and SMC branded zinc RMB 60/mt against SHFE 1402 zinc contract prices, trading between at RMB 14,930/mt. SHFE 1402 zinc contract prices opened high at RMB 14,900/mt, but lacking ability to rise, meeting resistance at the 60-day moving average. Traders busy with settling watched on the sidelines, and downstream purchasing was modest, while smelters were moving goods normally, leaving transactions muted.
With regard to zinc price trends this week, SMM found that 67% market players believe LME zinc prices will level out, moving around USD 1,900/mt. European economy continued to recover, but concerns over negative interest rate execution by European Central Bank remains. The Standard & Poor's 500 Index, Dow Jones Industrial Average and Nasdaq Composite Index hit record highs, but the US dollar index has been hovering at high levels due to expectations that the Fed will scale back QE3 this year, weighing down LME zinc prices. Besides, PMI reading from China and the US was mixed. As LME zinc prices leveled out and due to cash flow tightness, transactions will be muted. The Shanghai Composite Index will consolidate, dragging down SHFE 1402 zinc contract prices to move around RMB 14,850/mt. cargo holders will actively move goods. SMM sources report operating rates at galvanizers, die-casting zinc alloy and zinc oxide producers slid recently, with downstream buyers purchasing on an as-needed basis, with spot premiums between RMB 60-110/mt against SHFE 1402 zinc contract prices.
33% are optimistic, believing European and US stocks continued to rise with strong economic data, and the Fed will unlikely taper off QE3 this year, which will support zinc prices. LME zinc prices will touch USD 1,930/mt, and find support at USD 1,900/mt. SHFE 1402 zinc contract prices will move between RMB 14,860-14,960/mt, boosted by LME zinc prices, with spot premiums narrowing to RMB 40-90/mt. When combined with stable SHFE zinc prices, downstream consumption will increase.