SHANGHAI, Aug. 25 (SMM) – Premiums of #0 zinc against SHFE 1410 zinc contract prices expanded from RMB 0-40/mt two weeks ago to RMB 20-80/mt last week. Goods available were limited due to modest supply from some primary smelters, with the price spreads between different zinc brands expanding slightly. This allowed traders to hold back goods and keep prices firm, which led to high spot premiums and depressed speculative activities. Downstream buyers took a wait-and-see posture given high zinc prices during the slow season, leaving transactions muted.
Zinc prices found some support last Thursday as LME zinc inventories fell 2,650 mt to 735,200 mt. Previously, LME zinc prices have found solid support between USD 2,280-2,300/mt and are expected to regain momentum with this week's macroeconomic indicator releases. Nevertheless, investor caution and the strengthening US dollar index will constrain gains in LME zinc prices. LME zinc should consolidate around USD 2,330/mt this week before pointing towards USD 2,400/mt. SHFE 1410 zinc contract prices should test RMB 17,000/mt as LME zinc prices rise.
In China's spot markets, goods availability will remain tight since supply from smelters is expected to be limited, which will keep cargo holders unwilling to sell. In the meantime, downstream buyers should lack buying interest due to month-end cash flow problem, keeping trading muted. #0 zinc prices will rise with SHFE zinc prices this week, with spot premiums against SHFE 1410 zinc contract prices expected to be RMB 20-80/mt and RMB 0-50/mt against SHFE1411 zinc contract prices.