SHANGHAI, Mar. 19 (SMM) – LME zinc hovered around USD 2,012/mt during the Asian session after opening at USD 2,016/mt on Wednesday. The metal touched 11-month low of USD 1,981/mt before the US Fed announced its policy decision. However, LME zinc rallied later in the day as the US Fed’s dovish stance sent the US dollar index down and since crude oil rebounded. Finally, LME zinc closed down USD 8.5/mt or 0.42% at USD 2,006.5/mt. Trading volumes were up 603 lots to 6,679 lots, with positions down 5,294 to 283,888. Inventories fell 2,925 mt to 533,650 mt.
During Wednesday’s night session, SHFE 1505 zinc contract dropped to RMB 15,520/mt before ending down RMB 95/mt or 0.61% at RMB 15,565/mt.
Although the FOMC deleted the word “patience” in its statement following its most recent meeting, Yellen’s remarks at the subsequent press conference was interpreted as “removal of the word patient from doesn’t mean the Fed will be impatient”. This has triggered speculation that the rate increase may be postponed, driving a decline in the US dollar index. US shares rose sharply.
Crude oil inventories in the US were reportedly up another 9.6 million barrels for the week ending March 13, to 458.5 million barrels. However, crude oil prices posted a 2.83% rise helped by a weaker US dollar.
Base metals on LME fell before the FOMC meeting but rebounded later powered by the decline in US dollar index.
A softer US dollar should drive LME zinc up to USD 2,000-2,025/mt on Thursday. SHFE 1505 zinc contract should move between RMB 15,550-15,660/mt. In China spot zinc market, demand will remain poor, with spot goods expected to trade at discounts of RMB 0-30/mt and premiums of RMB 0-10/mt over SHFE 1505 zinc contract.
