SHANGHAI, Apr. 22 (SMM) – SHFE 1407 zinc contract prices opened at RMB 15,060/mt last Friday evening, and then moved between RMB 15,050-15,070/mt, with the lack of directions from the LME market and transactions quiet, and closing at RMB 15,055/mt. Trading volumes decreased by 2,288 lots to 3,890 lots, and total positions decreased by 106 lots to 63,584 lots. With the lack of directions from the LME market, SHFE 1407 zinc contract prices opened at RMB 15,055/mt on Monday, then fluctuated narrowly between RMB 15,050-15,075/mt, and closing at RMB 15,065/mt, up RMB 10/mt or 0.07%. Trading volumes decreased by 3,652 lots, to 10,584 lots, and total positions increased by 898 lots, to 64,482 lots.
#0 zinc prices were between RMB 15,030-15,060/mt, with spot discounts of RMB 10-30/mt against SHFE 1407 zinc contract prices. #1 zinc prices were around RMB 15,020/mt. SHFE 1407 zinc contract prices opened at RMB 15,060/mt on Monday, and then leveled out. Traders were actively purchasing goods due to tight supply, while some others took a wait-and-see attitude. Shuangyan branded #0 zinc prices were between RMB 15,040-15,050/mt, with RMB 15,030/mt for regular brands. During the second trading session, SHFE 1407 zinc contract prices rose slightly, pushing up spot prices. Shuangyan branded #0 zinc prices once climbed to RMB 15,070/mt at the end of trading, with transactions muted. With rising zinc prices, traders were actively selling goods, while downstream buying interest was depressed. Shuangyan branded #0 zinc prices were between RMB 15,040-15,060/mt, with RMB 15,030-15,050/mt for Feilong, Qinxin, Yuguang, Jiulong and SMC branded #0 zinc.
Last week, LME zinc prices rose by 1.78%. Will LME zinc prices extend gains this week? SMM surveyed 30 market players and found that 50% are optimistic, believing LME zinc prices will rise to test USD 2,100/mt, and SHFE 1407 zinc contract prices will test RMB 15,200/mt. April manufacturing data from China and many European countries will be released this week. Euro zone manufacturing activity slowed in March, but output during March was up slightly, a signal that manufacturing is also recovering. Markets expect April figures to reflect this improvement. Orders at Chinese enterprises stabilized during March and April. HSBC's final March manufacturing PMI for China was revised upward from flash PMI, and the index for April is also expected to show improvement, which will give support to zinc prices. Acceptance discount rate continued to fall recently, reflecting cash supply is relatively loose, which also secured operations at enterprises. Market sentiment improved recently after the State Council lowered deposit reserve ratio for rural commercial banks and cooperative banks and the release of low-income housing construction and railway construction policies, which lent some support to zinc prices. On the spot markets side, the SHFE/LME zinc price ratio remained low, keeping imports limited. Although smelters increased supply due to rising zinc prices in the latter half of last week, supply remained tight as some smelters conducted maintenance and some traders were holding back goods. Inventories in Shanghai, Tianjin and Guangdong fell by a total of 19,600 mt, to 322,800 mt, and were down for a seventh straight week, showing downstream demand is improving, and giving support to zinc prices. Spot premiums for copper remained high, which will also lend support to zinc prices, with spot zinc prices expected to rise to RMB 15,150/mt.
30% believe LME zinc prices will lack ability to rise further, moving between USD 2,040-2,080/mt, and SHFE 1407 zinc contract prices will hover between RMB 15,000-15,150/mt. spot premiums against SHFE 1407 zinc contract prices will remain around RMB 50/mt. Political turmoil in Ukraine will fuel risk aversion, which will weigh on LME zinc prices.
The remaining 20% are pessimistic, thinking LME zinc prices will fall to test USD 2,020/mt, and SHFE 1407 zinc contract prices will test support from RMB 14,950/mt. Zinc prices have rose by nearly RMB 400/mt since March 24, with spot discounts against SHFE 1407 zinc contract prices once narrowed to zero. Some cargo holders will likely sell goods at highs. Smelters in Guangxi and Yunnan completed maintenance, helping ease zinc supply tightness and dragging down zinc prices to RMB 14,900/mt.