SHANGHAI, Aug. 11 (SMM) –SHFE 1510 zinc contract prices opened at RMB 14,310/mt last Friday evening, then dipped to RMB 14,270/mt but rebounded to RMB 14,520/mt later, and closed at RMB 14,450/mt, up RMB 25/mt or 0.17%. SHFE 1510 zinc contract prices dipped to RMB 14,330/mt after opening on Monday, then rose to touch RMB 15,595/mt with surging A-share market in China and short covering, and closed at RMB 14,530/mt, up RMB 110/mt or 0.76%. Trading volumes decreased 70,488 to 190,408 lots, and total positions decreased 2,732 to 170,672. SHFE 1509 zinc contract prices are expected to test support from RMB 14,500/mt.
#0 zinc prices were between RMB 14,810-14,870/mt, RMB 350-460/mt above SHFE 1510 zinc contract prices last Friday. #1 zinc prices were RMB 14,780/mt. Spot premiums of imported #0 zinc were RMB 300-320/mt against SHFE 1510 zinc contract prices. SHFE 1510 zinc contract prices opened at RMB 14,445/mt, dipping to as low as RMB 14,335/mt and closing at RMB 14,500/mt. Smelters sold modestly at term contracts, leaving #0 zinc supply tight and raising spot premiums. Spot premiums shrank noticeably at the end of morning session as SHFE zinc price rose. Non-registered #0 zinc and imported zinc supply was tight. Downstream buyers remained cautious, leaving overall transactions quiet. SHFE zinc prices continued to rebound in the afternoon, with spot premiums down to RMB 360-450/mt against SHFE 1510 zinc contract prices. Shuangyan zinc prices were between RMB 14,880-14,950/mt, and registered #0 zinc prices were RMB 14,870-14,940, with trading quiet.
LME zinc price hit a two-year low of USD 1,846/mt last week. Will zinc price rebound this week?
SMM surveyed over 30 market players to find that 50% see LME zinc price remain stable, moving between USD 1,830-1,900/mt, and SHFE 1510 zinc contract prices are expected to hover between RMB 14,300-14,700/mt. The market will lack significant macroeconomic news. DH Fund Management and Chaos Investment retreated from the commodity market. However, domestic speculators are not overt pessimistic toward the market.
40% are bearish, expecting LME zinc price to fall to USD 1,800/mt, and SHFE 1510 zinc contract price to dip to RMB 14,000/mt. China’s PPI for July fell for the 42nd straight month, meaning growing deflationary pressure. When combined with sluggish import data and big volatility in China’s stock market, market sentiment will barely receive a boost. Spot premiums are firm. But a large influx of imported zinc is expected due to the rising SMM/LME zinc price ratio, which will weigh down zinc price. Besides, galvanizers and steel plants in Beijing, Tianjin and Hebei will be forced to cut output due to environmental protection inspections in mid-August, dampening zinc consumption. Zinc prices also lack technical support.
10% are bullish, seeing LME zinc price rise to USD 1,930/mt, and SHFE 1510 zinc contract price rally to RMB 15,000/mt. Additional stimulus measures are expected against soft demand in Q3. Reforms including the “One Belt One Road” will help ease market concerns. A growing number of zinc smelters plan to cut output now that zinc prices have dropped close to their cost lines, tightening supply and lending support to zinc price. Spot premiums of #0 zinc against SHFE 1510 zinc contract prices expanded to RMB 400/mt, bolstering market sentiment.