SMM Zinc Market Daily Review (2015-3-2)

SHANGHAI, Mar. 3 (SMM) – SHFE 1505 zinc contract prices opened at RMB 16,075/mt last Friday evening, then fluctuated between RMB 16,010-16,080/mt, and closed at RMB 16,035/mt, down RMB 15/mt or 0.09%. Trading volumes were down 1,700 to 51,466 lots, and total positions increased 150 to 141,830. SHFE 1505 zinc contract prices opened at RMB 16,045/mt on Monday, then touched RMB 16,210/mt now that the PBOC raised interest rate. Nonetheless, SHFE 1505 zinc contract price gains narrowed in the afternoon, closing at RMB 16,145/mt, up RMB 95/mt or 0.59%. Trading volumes increased 1,062 to 159,870 lots, and total positions increased 6,146 to 147,826. SHFE 1505 zinc contract prices should lack ability to rise further in the near term.

#0 zinc prices were between RMB 16,150-16,230/mt, RMB 0-70/mt above SHFE 1504 zinc contract prices. #1 zinc was traded around RMB 16,110-16,120/mt. SHFE 1504 zinc contract prices edged up to RMB 16,110/mt before 10:00 AM, down RMB 10/mt, causing spot premiums to narrow RMB 20/mt to RMB 30-70/mt. As SHFE 1504 zinc contract prices rose to RMB 16170-16200/mt later the day, spot premiums fell to RMB 0-40/mt. When combined with high inventories, some smelters sold actively. But traders that were bearish toward spot premiums in the future purchased modestly whilst selling enthusiastically. Downstream buyers replenished stocks limitedly, with overall transactions quiet. Huize and Hongda #0 zinc prices were RMB 16,180-16,230/mt, RMB 50-80/mt above SHFE 1504 zinc contract prices. Shuangyan #0 zinc prices were RMB 16,170-16,220/mt, with spot premiums of RMB 40-70/mt against SHFE 1504 zinc contract prices. Yuguang #0 zinc prices were RMB 16,160-16,210/mt, with spot premiums of RMB 30-60/mt against SHFE 1504 zinc contract prices. Qinxin, Qilin, Jiulong and Mengzi #0 zinc prices were RMB 16,150-16,190/mt, with spot premiums of RMB 0-40/mt against SHFE 1504 zinc contract prices. SMC #0 zinc prices were RMB 16,120-16,190/mt, with spot premiums of RMB 0-20/mt against SHFE 1504 zinc contract prices. Peruvian and Netherlandish #0 zinc prices were RMB 16,110-16,160/mt, RMB 0-20/mt below SHFE 1504 zinc contract prices. Namibia’s #0 zinc prices were RMB 16,100-16,160/mt, RMB 0-30/mt below SHFE 1504 zinc contract prices. SHFE 1504 zinc contract prices fluctuated between RMB 16,150-16,180/mt in the afternoon, with trading quiet.

LME zinc prices rebounded slightly last week with LME copper prices. SMM surveyed 30 market players to find that 60% are bullish toward zinc price trends this week, believing LME zinc prices will rise to USD 2,110/mt, and SHFE 1505 zinc contract prices will climb to RMB 16,350/mt. They base their opinion on China’s interest rate cut, which will positively affect commodity market. Greek crisis appeared to have eased, and downstream producers will restart production in March, which should cause demand to improve. This should also inspire China’s spot markets.

40% are neutral toward zinc prices this week, seeing LME zinc prices fluctuating between USD 2,060-2,100/mt, and SHFE 1505 zinc contract prices hovering between RMB 16,000-16,300/mt. They think positive effects from the interest rate cut by the PBOC have been absorbed, but base metal price drop should be arrested. However, trading is muted as a large number of downstream buyers have yet to return to the market, with spot premiums decreasing. When combined with growing zinc inventories, zinc price gains will also be constrained.