SMM Zinc Market Morning Review (2015-6-4)

SHANGHAI, Jun. 4 (SMM) – European Central Bank President Mario Dragi expressed his optimism toward eurozone economy, supporting the euro and pushing the US dollar index back down, which bolstered base metals prices. LME zinc prices bottomed at USD 2,145.5/mt then rose to stabilize at USD 2,165-2,175/mt, and closed at USD 2,174/mt, up USD 11/mt or 0.51%. Trading volumes decreased 4,287 to 8,593 lots, and total positions declined 5,307 to over 310,000. LME zinc inventories fell 2,075 to 440,000 mt.

SHFE 1508 zinc contract prices opened at RMB 16,400/mt Wednesday evening, then hovered around RMB 16,400/mt, and closed at RMB 16,380/mt, down RMB 105/mt or 0.64%. Trading volumes decreased 16,624 to 48,086 lots, and total positions dropped 1,594 to 136,920.

ADP’s employment in May for the US increased 201,000, the most significant gains since January, compared to the 200,000 expected. April’s data were revised to a 165,000 increase, down from the 169,000 growth. This bodes well for US non-farm employment data. But the euro surged, pushing down the US dollar index. US trade deficit in April was USD 40.9 billion, lower than the USD 44 billion expected. But March’s trade deficit was revised to USD 50.6 billion. Exports of the service sector hit a new high of USD 60.9 billion, while imports were down. The Fed’s Beige Book announced US economic activities during early April and late May were expanding.

European Central Bank (ECB) announced it will left refinancing interest rate unchanged at 0.05%, and overnight deposit interest rate at -0.2% and overnight lending rate at 0.3%, in line with market expectations. ECB president Mario Draghi said at a press conference that Quantitative Easing will remain in place until next September. European inflation rate has bottomed and will climb. This bolstered the euro to surge. Eurozone PMI and service PMI in May both fell short of April’s level, but higher than the flash data. Output and new business growth both hit a 3-month low in May, while jobs added increased for the seventh straight month to reach a 4-year high. Import price growth in May hit a new high since April 2012.

However, Greek crisis is still overshadowing the market.

The US dollar index fell 0.65%; the EUR:USD climbed 1.12%；European and US stocks mostly increased. LME base metals prices were mixed.

LME zinc prices are expected to move between USD 2,155-2,185/mt today. SHFE 1508 zinc contract prices will fluctuate between RMB 16,350-16,480/mt, with spot discounts of RMB 80-50/mt against SHFE 1508 zinc contract prices.