SHANGHAI, Aug. 5 (SMM) – SHFE 1410 zinc contract prices opened at RMB 16,785/mt last Friday, touching RMB 16,860/mt but then dipping to RMB 16,715/mt before hovering around RMB 16,750/mt, and closing at RMB 16,735/mt, down RMB 65/mt or 0.39%. Trading volumes decreased by 115,000 to 229,900 lots, and total positions increased by 946 to 281,300 lots. SHFE 1410 zinc contract prices opened at RMB 16,735/mt on Monday, and rose to an intraday high of RMB 16,895/mt with rising LME zinc prices. But as LME zinc prices gave back early gains, SHFE 1410 zinc contract prices dropped to RMB 16,800/mt and closed at RMB 16,830/mt, up RMB 30/mt or 0.18%. Trading volumes decreased by 34,778 lots, to 255,802 lots, and total positions decreased by 6,570 lots to 274,736 lots. SHFE 1410 zinc contract prices are expected to face downward pressure and test the 20-day moving average.
#0 zinc prices were between RMB 16,820-16,850/mt, with spot discounts of RMB 0-20/mt against SHFE 1410 zinc contract prices. #1 zinc prices were between RMB 16,780-16,810/mt. SHFE 1410 zinc contract prices surged to RMB 16,895/mt, then fluctuated between RMB 16,830-16,850/mt. Spot zinc prices fluctuated with SHFE zinc prices, with spot discounts between RMB 0-20/mt. Supply was limited as smelters moved goods modestly, leading to cargo holders keeping prices firm. Traders were inactive due to unfavorable spot discounts. Despite the fact that zinc prices rose after falling, some arbitrage traders and downstream buyers were pessimistic, when combined with the high temperatures, downstream demand was soft, leaving trading muted. #0 zinc prices were as low as RMB 16,800/mt in the morning, and Shuangyan branded #0 zinc prices were RMB 16,840-16,850/mt, with RMB 16,830/mt for Yuguang and Jiulong brand zinc. Tongguan brand #0 zinc prices were around RMB 16,800/mt. SHFE 1410 zinc contract prices fell to RMB 16,780/mt in the afternoon, then rallied to RMB 16,820/mt. #0 zinc prices were between RMB 16,790-16,820/mt.
LME zinc prices surged initially before falling last week, down 2%. With regard to zinc price trends this week, SMM surveyed 30 market players and found that 30% are bearish, believing LME zinc prices will fall to USD 2,300/mt, and SHFE 1410 zinc contract prices will drop to RMB 16,500/mt. Worse-than-expected US non-farm employment data depressed market confidence. High temperatures and the slow season will dent end-user orders, when combined with contracting profits from rising raw material prices, enterprises lack interest in building stocks. As such, #0 zinc prices will fall to RMB 16,500/mt.
47% are neutral, see LME zinc prices move between USD 2,320-2,370/mt, and SHEF 1410 hover between RMB 16,680-17,050/mt. The European Central Bank and the Bank of England will announce interest rate decisions, when combined with political turmoil in the Middle East and elsewhere, as well as the new Argentinian default, zinc price volatility will be restricted. Spot discounts of #0 zinc against SHFE 1410 will be RMB 0-30/mt.
23% are bullish, anticipating LME zinc prices will rebound to USD 2,380/mt, and SHFE 1410 zinc contract prices will rise to RMB 17,100/mt. A series of economic data from Europe, US and China scheduled for release this week are mostly optimistic, which will lend a boost to the market. In addition, both official and HSBC’s PMIs for China in July hit a record high for the year, pointing to a recovery in the manufacturing, and small stimulus policies also showed results, both giving support to zinc prices. SHFE 1410 zinc contract prices found solid support from the 20 day moving average, and spot supply is tight now that contango of spot zinc against LME three-month zinc contract prices inverted to backwardation, underpinning zinc prices. spot zinc prices are expected to rise to RMB 17,000/mt.