SMM Zinc Market Daily Review (2014-6-9)

SHANGHAI, Jun. 10 (SMM) – SHFE 1408 zinc contract prices opened at RMB 15,150/mt last Friday evening, then touched RMB 15,275/mt due to rising LME zinc prices, and closing at RMB 15,265/mt, up RMB 75/mt or 0.49%. SHFE 1408 zinc contract prices opened at RMB 15,265/mt, falling after touching RMB 15,290/mt, then fluctuating between RMB 15,240-15,260/mt on Monday. As LME zinc prices surged before the end of trading, SHFE 1408 zinc contract prices broke through RMB 15,300/mt, and closing at RMB 15,335/mt, up RMB 145/mt or 0.95%. Trading volumes increased by 29,512 lots, to 38,042 lots, and total positions increased by over 4,816 lots, to 82,024 lots.
 
#0 zinc prices were between RMB 15,200-15,250/mt, with spot discounts of RMB 0-40/mt against SHFE 1408 zinc contract prices. #1 zinc prices were between RMB 15,190-15,200/mt. SHFE zinc prices surged initially before falling, causing traders to enter the market, but downstream buying interest remained low. Smelters increased supply due to rising zinc prices, but overall transactions did not improve. Shuangyan branded #0 prices were between RMB 15,240-15,250/mt, and RMB 15,220-15,240/mt for Yuguang, Jiulong and Qinxin branded #0 zinc. Imported #0 zinc prices were between RMB 15,180-15,200/mt, with Kazakhstan #1 zinc prices around RMB 15,180/mt. SHFE zinc prices leveled out in the afternoon, with spot prices stable. But as SHFE zinc prices strengthened at the end of trading, traders took a wait-and-see attitude, with #0 zinc prices between RMB 15,280-15,300/mt, and imported #0 zinc prices between RMB 15,170-15,190/mt.

LME zinc prices edged up to touch USD 2,100/mt last week. SMM surveyed 30 market players and found that 40% believe LME zinc prices will continue to rise to USD 2,140/mt. according to China Customs, China's exports were up 7% in May, up 0.9% from April's. The growth is attributable to economic recovery in Europe and the US. China's deposit reserve ratio cut for rural, small enterprises and financial institutions that meet requirements will give support to economy and zinc prices. The number of US non-farm employment has stood above 200,000 for four consecutive months, and euro zone pushed easing monetary policies, which will bolster zinc prices. SHFE 1408 zinc contract prices will rise to RMB 15,350/mt. Maintenance at producers of Shuangyan and Yuguang branded zinc will affect supply, which will push up spot prices to RMB 15,300/mt.

37% are neutral. China's May results for CPI, PPI, retail sales, fixed assets investments, and value-added at scale-efficient industries will all be released this week and are expected to show slight improvements. US May PPI, retail sales, and the University of Michigan's June CCI will also be announced. Until solid macroeconomic news is announced later in the week, markets will continue to absorb US May non-farm employment data and the recent easing of monetary policy by the European Central Bank. LME zinc prices will move between USD 2,080-2,120/mt and SHFE 1408 zinc contract prices will hover between USD 15,150-15,300/mt, with spot zinc prices between RMB 15,150-15,250/mt.

The remaining 23% believe LME zinc prices will fall to test support from USD 2,060/mt. The ongoing probe into finance-driven imports at Qingdao port, combined with the impact from RMB depreciation, will deepen concerns over finance-driven metal imports and negatively affect copper and aluminum prices, which will in turn drag down zinc prices. In addition, as the low-demand season sets in, orders from galvanizers and die-cast zinc alloy producers will weaken, and high zinc prices will also curb zinc consumption. SHFE 1408 zinc contract prices will test support from RMB 15,100/mt, and spot zinc prices will fall to RMB 15,100/mt.