[Zn Price] SMM Zinc Market Daily Review (2015-7-20)

SHANGHAI, Jul. 21 (SMM) – SHFE 1509 zinc contract prices opened at RMB 15,625/mt last Friday evening, then hovered between RMB 15,600-15,680/mt, and closed at RMB 15,650/mt, down RMB 15/mt or 0.1%. Trading volumes decreased 17,772 to 47,948 lots, and total positions grew 1,278 to 117,954. SHFE 1509 zinc contract prices dipped to RMB 15,480/mt at one point with the leaving of longs and entering of shorts, but stabilized between RMB 15,500-15,550/mt, and closed at RMB 15,550/mt, down RMB 115/mt or 0.73%. Trading volumes increased 14,960 lots to 132,000 lots, and total positions decreased 5,036 to 112,000. SHFE 1509 zinc contract prices are expected to fall to the 20-day moving average.

#0 zinc prices were between RMB 15,500-15,530/mt, RMB 0-20/mt above SHFE 1509 zinc contract prices. #1 zinc prices were RMB 15,470-15,480/mt. SHFE 1509 zinc contract prices inched lower during 9:00-10:15 am, with spot premiums of RMB 0-20/mt, and with #0 zinc prices between RMB 15,580-15,620/mt. SHFE 1509 zinc contract prices stabilized between RMB 15,500-15,530/mt during 10:30-11:30 am, with spot premiums/discounts largely unchanged. Smelters sold normally, and traders also released goods. When combined with large inflows of imported zinc recently, supply was ample. Traders were unwilling to build stocks due to fears that spot discounts will widen after delivery and slow sales, mainly operated for term contracts. Downstream buyers purchased as needed, leaving overall transactions quiet. SHFE 1509 zinc contract prices fluctuated in a narrow range in the afternoon, with spot premiums/discounts stable and transactions muted.

With regard to zinc price this week, SMM surveyed 30 market players to find that are neutral, believing LME zinc price will move between USD 2,040-2,080/mt, and SHFE 1509 zinc contract prices will hover between RMB 15,500-15,800/mt. Easing Greek crisis will help improve market sentiment. But investors remain cautious due to uncertainty toward China’s A-share market, giving little directions to base metal prices.

40% are bearish, seeing LME zinc price falling to USD 2,000/mt, and SHFE 1509 zinc contract prices moving between RMB 15,300-15,500/mt. They believe improvement in US economy will grow market expectations that the Fed will raise interest rate in the near term, which will bolster the US dollar index whilst weighing down base metals. Besides, demand weakened in the off-season. When combined with inflows of imported zinc, domestic zinc market will take a hit. The market is also expecting spot discounts to expand, which will also weigh on zinc price.

17% are bullish. They expect LME zinc price to break through USD 2,100/mt, and SHFE 1509 zinc contract prices will point toward RMB 16,000/mt. China has pushed a series of stimulus measures, and iron ore and rebar prices also rose for a few consecutive days, which will boost market sentiment. Smelters and mines also held back goods on continuously falling zinc prices, leaving inventories at cargo holders low. Besides, some mines lowered TCs for zinc concentrate, also positively affecting zinc price.