SMM Zinc Market Morning Review (2015-2-26)

SHANGHAI, Feb. 26 (SMM) – LME zinc overnight started higher at USD 2,085/mt and rose to an intraday high of USD 2,095/mt in the Asian trading session before ending down USD 11/mt, or 0.53% at USD 2,060.5/mt in the European and US trading hours. Trading volumes for three-month zinc on the London Metal Exchange gained 6,235 lots to 13,873 lots, while positions added 1,505 to 282,969. LME zinc inventories shrank 3,400 mt to 569,000 mt.

Zinc for May delivery on the Shanghai Futures Exchange, the most active contract opened lower at RMB 16,010/mt and then slid to close down RMB 100/mt, or 0.62% at RMB 15,955/mt in Wednesday’s night session. Trading volumes for the most active contract increased to over 40,000 lots, while positions surged 10,000 to 112,900.

US Federal Reserve Chairwoman Janet Yellen testified on Wednesday before a House Financial Services Committee that the timing of an interest rate increase is flexible, sending the US dollar index down.

HSBC’s preliminary China Manufacturing PMI rebounded to a new four-month high of 50.1 in February, beating 49.5 expected and the final reading of 49.7 in January. The output sub-index rose to a five-month high of 50.8, up from January’s 50.3. The sub-indices tracking output and new orders accelerated to rise. However, the new export orders sub-index leveled off, while the employment sub-index fell at a sharper pace. The input and output prices declined at a slower rate.

China’s Premier Li Keqiang announced in a routine meeting on Wednesday to speed up construction of major waterworks and stimulate economic growth via public goods investment. A consensus was reached at the meeting to ramp up active fiscal policy to help stabilize the Chinese economy.

US new home sales totaled an annualized 481,000 in January, higher than expectations, but below December’s 482,000. The homes sales edged down 0.2% MoM over the month, a fall smaller than a 2.3% decline expected.

Saudi Arabia’s Oil Minister Ali al-Naimi stated on Wednesday that oil demand is growing and the crude oil market has turned “calm” and that he is satisfied with the new trend in the market. This helped US benchmark crude prices close up 3.47% on Wednesday.

The US dollar index fell 0.27%, while the euro inched up 0.18% versus the greenback. European and US stocks were mixed. LME copper and tin rose slightly, but other base metals all fell.

A series of economic indicators will be released on Thursday, including the UK’s Q4 GDP, the euro zone’s economic climate index and US durable goods orders. LME zinc is expected to test support at the 5-day moving average and move between USD 2,055-2,085/mt. The most active SHFE 1505 zinc contract is set to fluctuate between RMB 15,900-16,000/mt. Spot zinc should trade at a RMB 100-150/mt premium to the SHFE 1504 zinc contract.