SMM Zinc Market Daily Review (2015-4-27)

SHANGHAI, Apr. 27 (SMM) – SHFE 1507 zinc contract opened at RMB 16,695/mt on Monday and increased more than LME zinc to touch a high of RMB 16,905/mt, before ending at RMB 16,810/mt, up RMB 260/mt. Positions increased 26,998 to 133,190 and trading volumes grew to 155,364 lots.

Prices of #0 zinc were RMB 16,630-16,660/mt, with discounts of RMB 90-110/mt to SHFE 1506 zinc contract. #1 zinc traded at RMB 16,570-16,580/mt. Smelters moved goods actively after the zinc price hike, but supply of ordinary brands remained limited after dip-buying of traders. Most downstream buyers held on the sidelines against the volatile prices

In #0 zinc market, Shuangyan brand sold for 16,630-16,660/mt, with discounts of RMB 90-110/mt to SHFE 1506 zinc contract. Yuguang, Qinxin and Qiling traded at RMB 16,630-16,640/mt, with discounts of RMB 100-110/mt to SHFE 1506 lead contract. Prices were RMB 16,600-16,610/mt for SMC #0 zinc, a discount of RMB 140/mt to the June-delivery zinc, and prices of AZ and Indian #0 zinc were RMB 16,580-16,600/mt and RMB 16,570-16,580/mt. SHFE zinc moved higher in the afternoon, and spot prices held firm.

SMM’s survey of 30 industry participants shows that 53% of them are upbeat that LME zinc will climb above USD 2,280/mt and test USD 2,300/mt and SHFE 1507 zinc contract may challenge RMB 17,000/mt. These players noted that recovering market confidence, rebounding crude oil prices, and a pullback in the US dollar index will bolster base metals prices.

In addition, China’s monetary easing fueled optimism in the market and technical indicators for LME zinc are also pointing upwards. Large spot premiums in China’s spot zinc markets will proffer impetus for zinc prices as well.

47% of industry insiders expect LME zinc prices to tread water between USD 2,230-2,280/mt and SHFE 1507 zinc prices to stay in the RMB 16,500-16,800/mt range. These players argue that although technical indicators show positive signs, long positions in SHFE zinc are limited, so the price rally last week was primarily driven by climbing LME zinc prices.

Moreover, China’s zinc inventories have been increasing after the Chinese New Year holiday, while consumption was weaker than a year ago due to China’s economic slowdown. In this context, a wave of selling will be triggered among smelters and traders once SHFE zinc prices hit RMB 17,000/mt, in turn pressuring prices. As such, these market players see no further increase in zinc prices this week.