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SMM Zinc Market Morning Review (2014-4-9)
Apr 9,2014 10:39CST
price review forecast
LME zinc opened at USD 2,002/mt on Tuesday before nudging up to USD 2,010/mt on rising Chinese stock market.

SHANGHAI, Apr. 9 (SMM) – LME zinc opened at USD 2,002/mt on Tuesday before nudging up to USD 2,010/mt on rising Chinese stock market. The US dollar index hit a 5-month low of 79.71 before the FOMC meeting, driving LME zinc up further to USD 2,029/mt. The metal finished the day up USD 24/mt at USD 2,028/mt. Trading volumes added 4,054 lots to 9,177 lots, but positions decreased 1,475 lots to 295,363 lots. Inventories dropped 3,050 mt to 824,325 mt.

On Tuesday night, SHFE 1406 zinc contract moved higher after starting at RMB 14,910/mt, and ended the night session at RMB 14,950/mt, a gain of RMB 60/mt or 0.4%. Trading volumes contracted 7,586 lots to 8,362 lots, and positions also shrank 178 lots to 67,540 lots.

On Wednesday, a softer greenback should leave LME zinc fluctuating between USD 2,015-2,040/mt. The most active SHFE zinc contract should vacillate in a RMB 14,900-15,000/mt band. In Shanghai spot zinc market, spot discounts of RMB 140-170/mt are expected over SHFE 1406 zinc contract.

Investors were mostly focused on several US Federal Reserve officials’ speeches concerning easy monetary policy with the dearth of market-driven news. Narayana Kocherlakota, president of the Minneapolis Fed, stated the US Fed should further cut the fed funds rate and also consider lowering excess reserve ratio to facilitate US economic recovery. Philadelphia Fed President Charles Plosser noted that the Fed should adjust its forward guidance to some extent and offer more conditions for the tightening of its monetary policy. He also added that it would be quite some time to come before the Fed could pull out of support to the US economy eternally. In response to these dovish comments, the US dollar index notched a sharp fall, closing lower for a fourth straight trading day and helping support base metals prices.

The Ukraine crisis continued to deteriorate on Tuesday. The Ukraine police was reported to arrest 70 people occupying local government building in eastern city Kharkiv, but pro-Russia protestors in other two cities still held their ground. The Ukrainian government declared that these violent acts were fermented by Russia to split Ukraine. Russian Foreign Minister Sergei Lavrov also warned that using force to end the protests in eastern Ukraine could lead to civil war. US Secretary of State John Kerry said that “recent events could potentially be a contrived pretext for Russian military intervention just as we saw in Crimea”. In this context, market risk aversion sentiment rose, with London gold prices closing up 0.88%. As capital flocked in the euro zone from Ukraine and Russia for risk aversion, the euro finished higher, buttressing base metals prices

Meanwhile, the International Monetary Fund (IMF) lowered its forecast for 2014 global GDP growth to 3.6%, down from 3.7%, but remained its 7.5% growth forecast for China’s GDP this year.

Main European share indexes finished lower, while US shares stabilized temporarily. Asian shares were mixed, and the Shanghai Composite ended up 1.92%, aided by the strength in banking shares. LME base metals prices closed higher, except for LME tin and nickel prices.

LME zinc prices
SHFE zinc prices

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