SMM Zinc Market Daily Review (2015-6-8)

Published: Jun 09, 2015 10:56 (GMT+8)

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SHFE 1508 zinc contract prices opened at RMB 16,230/mt last Friday evening, then moved between RMB 16,230-16,300/mt, and closed at RMB 16,270/mt, down RMB 40/mt or 0.25%.

SHANGHAI, Jun. 9 (SMM) –SHFE 1508 zinc contract prices opened at RMB 16,230/mt last Friday evening, then moved between RMB 16,230-16,300/mt, and closed at RMB 16,270/mt, down RMB 40/mt or 0.25%. SHFE 1508 zinc contract prices opened at RMB 16,280/mt, then fluctuated below RMB 16,300/mt on Monday, and closed at RMB 16,275/mt, down RMB 25/mt or 0.21%. Trading volumes decreased 58,178 to 80,784 lots, and total positions fell 1,610 to 128,556. Any downward room for SHFE 1508 zinc contract prices are expected to be limited this evening.

#0 zinc prices were between RMB 16,250-16,280/mt, RMB 30-10/mt below SHFE 1508 zinc contract prices. #1 zinc prices were RMB 16,180-16,240/mt. SHFE 1508 zinc contract prices fluctuated between RMB 16,270-16,290/mt, flat at last Friday’s level, with spot discounts narrowing RMB 20/mt. Smelters sold modestly, causing supply to tighten and allowing cargo holders to hold prices firm, and in turn contracting spot discounts. Traders took a wait-and-see attitude, but downstream buyers purchased as needed, leaving overall transactions largely unchanged from last Friday. SHFE 1508 zinc contract prices remained steady in the afternoon, with spot discounts of #0 zinc between RMB 40-20/mt and trading quiet.

LME zinc prices dropped below the 60-day moving average last week. Will LME zinc prices rebound this week?

SMM surveyed 30 market players to find that 43% are neutral, who believe LME zinc prices will move between USD 2,120-2,160/mt, and SHFE 1508 zinc contract prices will hover between RMB 16,150-16,450/mt. Better-than-expected US non-farm employment data bolstered the US dollar index to rise above 96, which will weigh down base metals prices. China’s export data in May were upbeat, but imports fell far short of market expectations, suggesting sluggish domestic demand. But additional stimulus measures by the PBOC will positively affect base metals prices. On the demand side, the automobile market has been lackluster this year, unfavorable for zinc consumption. When combined with the lack of capital, zinc prices will lack impetus to rise, but any possible drop will be limited either as some smelters held back goods on continuously falling zinc prices.

37% are bullish, believing LME zinc prices will rebound to USD 2,170-2,180/mt, and SHFE 1508 zinc contract prices are expected to rise to RMB 16,500/mt. poor economic indicators triggered market expectations of additional stimulus measures from China, boosting market sentiment. Contango on LME zinc increased after dipped to USD 10/mt, which will support LME zinc prices. Zinc inventories in Shanghai, Guangdong and Tianjin have fallen for three consecutive weeks, lending support to zinc prices. Spot discounts have been close to zero as cargo holders hold prices firm.

20% are bearish, seeing LME zinc prices falling to USD 2,100/mt, and SHFE 1508 zinc contract prices down to RMB 16,100/mt. A strengthening US dollar index, combined with ongoing Greek crisis keep the market pessimistic. When coupled with the lack of longs and capital outflows into the stocks market, zinc futures prices look set to inch down.

SHFE zinc prices LME zinc prices

Data Source Statement: Except for publicly available information, all other data are processed by SMM based on publicly available information, market communication, and relying on SMM's internal database model. They are for reference only and do not constitute decision-making recommendations.

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