[Zn Price] SMM Zinc Market Daily Review (2015-8-3)

SHANGHAI, Aug. 4 (SMM) – SHFE 1510 zinc contract prices opened at RMB 14,815/mt last Friday evening, then rose to RMB 14,970/mt, and dropped back due to selling pressure and closed at RMB 14,730/mt, down RMB 150/mt or 1.01%.  Trading volumes increased 27804 to 75,236 lots, and total positions grew 7,862 to 136,028. SHFE 1510 zinc contract prices rose after opening today, then moved around RMB 14,750/mt. With a large number of shorts rushing into the market, SHFE 1510 zinc contract prices fell back to as low as RMB 14,540/mt, and closed at RMB 14,585/mt, down RMB 285/mt or 1.92%. Trading volumes increased 77,904 to 176,040 lots, and total positions increased 16,898 to 145,064. SHFE 1509 zinc contract prices are expected to test support from RMB 14,500/mt.

#0 zinc prices were between RMB 14,980-15,010/mt, RMB 240-260/mt above SHFE 1510 zinc contract prices on Monday. #1 zinc prices were RMB 14,920-14,940/mt. SHFE 1510 zinc contract prices hovered around RMB 14,740/mt, down RMB 80/mt. Spot premiums were RMB 260-300/mt in the morning, but fell later as some smelters delivered for term contracts. Downstream buyers entered the market as prices fell below RMB 15,000/mt, allowing overall transactions to improve. #0 zinc prices were around RMB 15,050/mt, with spot premiums between RMB 180-190/mt. Shuangyan zinc prices were around RMB 15,100/mt, with spot premiums of RMB 230/mt against SHFE 1510 zinc contract prices.

LME zinc prices surged initially but fell back last week. With LME zinc extend losses this week?

SMM surveyed over 30 market players to find that 60% are neutral, believing LME zinc prices will fluctuate between USD 1,870-1,930/mt, and SHFE 1510 zinc contract prices will hover between RMB 14,400-14,800/mt. They think zinc price will move in a wide range with the release of a series of economic indicators. Nonetheless, zinc prices have fallen below cost lines of RMB 15,000/mt, and this should deter supply from smelters, leading to supply tightness. But zinc price will lack ability to rise due to technical pressure.

33% are bearish, believing LME zinc price will dip to USD 1,850/mt, and SHFE 1510 zinc contract prices will fall to RMB 14,200/mt. US non-farm employment data slated for release this week are expected to improve, which will push up the US dollar and weigh down base metals. Besides, Caixin’s final manufacturing PMI for China released early this week was 47, falling short of market expectations and flash data, meaning soft demand from SMEs and depressing market sentiment. Total positions on SHFE zinc grew over 10,000 on Monday as shorts increased, which will negatively affect zinc prices.

7% are bullish, seeing LME zinc price rising to USD 1,950-1,960/mt and SHFE 1510 zinc contract prices up to RMB 15,000/mt. They believe zinc futures prices should technically rebound. Fundamentals of zinc is also stronger compared to other base metals. In addition, mines and smelters will continue to hold back goods on low zinc prices, tightening supply. Downstream buying interest in Shanghai improved at lows. When combined with low inventories on hand, trading is expected to get a boost. Spot premiums of #0 zinc in Shanghai against SHFE 1510 zinc contract prices widened to RMB 250-300/mt, which should also bolster zinc prices.