SHANGHAI, May. 14 (SMM) – Chinese zinc smelters took a mixed attitude toward zinc price outlook, a recent SMM survey showed.

Zinc prices on the London Metal Exchange rose 2.96% in April, and the average SMM price for #0 zinc rose 198.1 yuan per tonne to 14,944.29 yuan per tonne during the month.

About one third of smelters surveyed by SMM believed LME zinc prices would hold steady. LME zinc prices met strong resistance at $2,100 per tonne, but support at the 60-day moving average was also solid. Given mixed macroeconomic news and an easing of supply tightness in physical markets, spot premiums to three-month zinc contract on Shanghai Futures Exchange were expected to narrow, leaving little room for spot prices to rise further.

One third of the smelters were bullish and based their opinions on the following.

288,000 jobs were added in the US non-farm sector in April, the largest growth since January 2012. Meanwhile, the US April unemployment rate sank to 6.3%. Upbeat economic data from the US were a sign that the country’s economy was on the mend.

In the euro zone, Portugal announced it did not need international bailout any more, and Ireland also stopped receiving aids, both boosting market morale and bolstering LME zinc prices.

Continuous falls in zinc inventories and stable demand were also believed to lend support to zinc prices.

The remaining one third of respondents, however, were bearish, noting that the Ukraine crisis might continue to affect the market. Standard & Poor's Ratings lowered Russia’s credit rating to one notch above junk for fear of capital outflows. In a bid to keep a lid on capital outflow, Russia’s central bank raised key interest rate to 7.5%. Weaker risk appetite arising from the geopolitical crisis would weigh LME zinc prices down.

Spot zinc prices have risen by 400 yuan per tonne over the past month. However, supply in spot zinc market increased after smelters in Guangxi and Yunnan completed maintenance. Cargo holders and smelters also showed stronger selling interest on higher prices, which caused spot premiums to narrow. In this scenario, some smelters expected spot zinc prices to fall.