SHANGHAI, Jun. 30 (SMM) – SHFE 1509 zinc contract prices opened at RMB 15,600/mt, then remained flat and closed at RMB 15,550/mt, down RMB 80/mt. SHFE 1509 zinc contract prices fluctuated between RMB 15,550/mt on Friday, and fell sharply in the afternoon, dipping to RMB 15,380/mt, and closing at RMB 15,400/mt, down RMB 230/mt or 1.47%. Trading volumes increased 26,620 to 104,818 lots, and total positions grew 7,466 to 124,436. SHFE 1509 zinc contract prices will fall more slowly and test support from RMB 15,400/mt.
#0 zinc prices were between RMB 15,550-15,570/mt, RMB 0-20/mt above SHFE 1509 zinc contract prices. #1 zinc prices were RMB 15,510-15,520/mt. SHFE 1509 zinc contract prices fluctuated between RMB 15,550-15,570/mt, down nearly RMB 100/mt, with spot premiums between RMB 10-30/mt in the morning, but narrowing to RMB 0-10/mt due to weak downstream buying interest. SHFE 1509 zinc contract prices fell to RMB 15,510-15,520/mt at the end of trading, but spot premiums remained largely unchanged. Falling zinc prices increased market pessimism. When combined with month-end cash tightness, downstream buying interest was weak. Traders reduced purchases due to expectations of additional inflows of imported zinc from rising SMM/LME zinc price ratio. Smelters and cargo holders reported sluggish sales, with overall transactions muted. SHFE 1509 zinc contract prices fluctuated between RMB 15,420-15,460/mt in the afternoon, with spot prices RMB 10-30/mt above SHFE 1509 zinc contract prices.
LME zinc prices hit a three-month low. Will LME zinc price fall further? SMM surveyed 30 market players to find that 47% are neutral, believing LME zinc prices will move between USD 2,000-2,060/mt and SHFE 1509 zinc contract prices will fluctuate between RMB 15,300-15,600/mt. They expect additional stimulus measures. HSBC’s and official PMI for China in June is promising, bolstering the market. But ongoing Greek crisis, combined with the upcoming non-farm data in the US, will left investors cautious. Nonetheless, LME zinc prices will find support from USD 2,000/mt. Despite soft demand, plunging zinc prices will deter mines and smelters from producing.
43% are bearish, seeing LME zinc prices fall below USD 2,000/mt and SHFE 1509 zinc contract prices drop below RMB 15,300/mt. China’s A-share market has falling for three weeks in a row. China’s deposit reserve ratio and interest rate cut failed to boost market confidence, weighing down commodity prices. Chronic Greek crisis will also weigh on the euro, which will bolster the US dollar and in turn push down base metals. When combined with the onset of the off-season and falling zinc prices, consumers will contract inventories, in turn weighing on zinc prices.
10% are bullish, believing LME zinc prices will rebound to USD 2,060/mt, and SHFE 1509 zinc contract prices will return to RMB 15,800/mt. They base their opinion on the interest rate and deposit reserve ratio cut by the PBOC. When combined with rising home prices recently, market confidence will increase. Besides, cash tightness will alleviate early next July.