SHANGHAI, Jun. 24 (SMM) – SHFE 1409 zinc contract prices opened at RMB 15,765/mt last Friday evening, then hovered around RMB 15,760/mt, dipping to RMB 15,710/mt and closing at RMB 15,770/mt, up RMB 40/mt or 0.25%. SHFE 1409 zinc contract prices opened at RMB 15,770/mt. HSBC's June PMI for China rose above 50, reflecting a series of easing monetary policies implemented by the State Council begins to show results, and boosting SHFE 1409 zinc contract prices to rise after dipping to RMB 15,705/mt in the morning, and breaking through RMB 15,800/mt. But as a large number of longs left the market at the end of trading, SHFE 1409 zinc contract prices closed at RMB 15,765/mt, up RMB 35/mt or 0.22%. Trading volumes decreased by 16,690 lots, to 53,080 lots, and total positions increased by 3,824 lots, to 126,160 lots.
#0 zinc prices were between RMB 15,550-15,610/mt, with spot discounts of RMB 120-100/mt against SHFE 1408 zinc contract prices. #1 zinc prices were between RMB 15,500-15,530/mt. SHFE 1409 zinc contract prices inched down to RMB 15,665/mt after opening, with spot discounts of #0 zinc narrowing slightly to RMB 100/mt, leaving investor interest in operations weak. Shuangyan branded #0 prices were between RMB 15,570-15,580/mt, and RMB 15550-15560/mt for regular brands. SHFE 1409 zinc contract prices touched RMB 15,745/mt later the day, and spot discounts of #0 zinc expanded to RMB 120-100/mt. Smelters were mostly actively selling, but downstream buying interest was low since they do not think zinc prices will continue to rise further and due to month-end cash flow problems, with overall transactions muted. Shuangyan branded #0 zinc prices were RMB 15,570-15,610/mt, and RMB 15,570-15,600/mt for Yuguang branded #0 zinc. AZ branded #0 zinc prices were between RMB 15,550-15,560/mt, and RMB 15,490-15,520/mt for other imported zinc. Baohui and Tongguan brands were between RMB 15,550-15,570/mt. trading for deliverable brand zinc was relatively brisk, but demand for undeliverable goods was weak. SHFE 1408 zinc contract prices climbed to RMB 15,810/mt in the afternoon, but registered #0 zinc prices were around RMB 15,590-15,610/mt.
LME zinc prices soared and touched a 16-month high. Will LME zinc prices continue to rise this week?
According to an SMM survey of 30 market players, 43% believe LME zinc prices are expected to break through USD 2,200/mt. Negative effects from China's probe into financing fraud at the Port of Qingdao have been absorbed by the market, and Chinese Premier Li's statement predicting China's GDP growth for the year would be at least 7.5% also boosted market confidence. Besides, HSBC's June PMI for China rose above 50 for the first time in 2014, reflecting that China's a series of easing monetary policies implemented by the State Council begins to show results. In this context, LME zinc prices will get a boot. SHFE 1409 zinc contract prices will test RMB 16,000/mt, and spot zinc prices will be dragged down by soft demand, with spot discounts expanding to RMB 200/mt.
40% think LME zinc prices will hover between USD 2,150-2,190/mt. LME zinc prices will met resistance at USD 2,200/mt mark, but find support at the 5-day moving average. Spot prices in China will resist both increases and declines due to the onset of low-demand season for zinc, despite falling zinc inventories in Shanghai, Guangdong and Tianjin. SHFE 1409 zinc contract prices will move between RMB 15,600-15,850/mt, with spot discounts between RMB 80-140/mt.
The remaining 17% are pessimistic, believing LME zinc prices will test support from USD 2,140/mt. escalating turmoil in Iraq will cause selling pressure for base metals. Besides, contango of spot zinc against LME three-month zinc contract prices depressed market optimism. Although SHFE zinc prices hit a record high for the year, the onset of low-demand season for zinc and sluggish orders left downstream enterprises cautious, which maintain zinc inventories at extremely low levels. SHFE 1409 zinc contract prices are expected to test support from RMB 15,450/mt, with spot zinc prices down to RMB 15,450/mt.