SHANGHAI, Jul. 28 (SMM) – SHFE 1509 zinc contract prices opened at RMB 15,000/mt last Friday evening, then fell to a four-week low of RMB 14,840/mt, but clawed back some losses at the end of trading, and closed at RMB 14,940/mt, down RMB 45/mt or 0.3%. SHFE 1509 zinc contract prices fluctuated around RMB 15,800/mt after opening. As China’s A-share market extended losses in the afternoon, SHFE 1509 zinc contract prices dipped to as low as RMB 15715/mt, and closed at RMB 15,750/mt, down RMB 330/mt or 2.19%. Trading volumes decreased 3,936 lots to 114,228 lots, and total positions grew 1,276 to 104,618. SHFE 1509 zinc contract prices are expected to fall to RMB 14,600/mt.
#0 zinc prices were between RMB 14,880-14,930/mt, RMB 80-120/mt above SHFE 1509 zinc contract prices last Friday. #1 zinc prices were RMB 14,820-14,840/mt. SHFE 1509 zinc contract prices fell to RMB 14,800/mt after opening, with spot premiums of RMB 130-180/mt, but falling on soft demand and down to RMB 80-120/mt at the end of trading. Smelters were reluctant to sell, but downstream buyers entered the market during 10:30-11:30 am, helping improve trading. Spot premiums against SHFE 1509 zinc contract prices were RMB 100-120/mt in the afternoon. Purchases were quiet. SHFE 1509 zinc contract prices plunged at the end of trading, but spot premiums/discounts remained largely unchanged.
LME zinc prices staged a 7-day losing streak. Will LME zinc price drop be arrested this week？
SMM surveyed over 30 market insiders to find that 60% are bearish, believing LME zinc prices will dip to USD 1,900/mt this week, and SHFE 1509 zinc contract prices will fall to RMB 14,500/mt. Despite a narrower drop in profit at China’s large industrials in the first six months of the year, the profit in June inverted to a decline. China’s manufacturing PMI in June hit a 15-month low, pointing to soft demand in China, depressing market sentiment. With growing market expectations of a interest rate hike by the Fed, the US dollar will gain ground, weighing on base metals. Besides, more investors bet on further price declines, meaning strong selling pressure. Despite active trading among traders, downstream consumption showed little improvement, which will also drag down zinc price.
The remaining 40% are neutral, believing LME zinc prices will hover between USD 1930-1980/mt, and SHFE 1509 zinc contract prices will move between RMB 14,800-15,000/mt. Short covering is expected to give support to zinc prices. Meanwhile, smelters are reluctant to sell now that spot zinc prices dropped below RMB 15,000/mt. Some smelters cut output for maintenance, which will tighten supply. Spot premiums in Shanghai widened to RMB 100/mt, also supporting zinc prices. But the off-season of July-August, combined with growing inventories and soft demand will constrain any price gains.