SHANGHAI, Sept. 8 (SMM) – The SHFE market was closed last Friday. SHFE 1511 zinc contract prices opened low at RMB 14,705/mt Monday, then rose to RMB 14,770-14,790/mt. In the afternoon, SHFE 1511 zinc contract prices dipped to RMB 14,690/mt and closed at RMB 14,770/mt, up RMB 30/mt or 0.2%. Trading volumes decreased 22,820 to 48,202 lots, and Total positions grew 354 to 121,000.
#0 zinc prices were between RMB 14,830-14,880/mt, RMB 30-90/mt above SHFE 1510 zinc contract prices. #1 zinc traded at RMB 14,720-14,740/mt. Imported #0 zinc prices were RMB 130-100/mt below SHFE 1510 zinc contract prices.
Supply was ample, with domestic non-deliverable zinc trading close to imported zinc. Mainstream brands traded between RMB 14,800-14,880/mt in the afternoon, with spot discounts expanding to RMB 150-140/mt. Prices of SMC and YP zinc were below Indian and Peruvian zinc at one point.
LME zinc prices fell back below USD 1,800/mt last week. Will LME zinc prices stabilize this week?
SMM surveyed over 30 market players to find that 61% are bullish, expecting LME zinc prices to rise to USD 1,850/mt, and SHFE 1511 zinc contract prices to return above RMB 15,000/mt. China has released stimulus measures recently, which will help stabilize China’s stock markets and boost market sentiment. Besides, zinc prices have fallen below RMB 15,000/mt, depressing smelters willingness to produce and tightening supply. Moreover, consumption will improve following the 3-day holiday as plants in North China resume operation. SMM learns trading for domestic non-deliverable and imported zinc was brisk after the holiday, bolstering zinc prices.
20% are neutral, believing LME zinc prices will move between USD 1,770-1,830/mt, and SHFE 1511 zinc contract prices will fluctuate between RMB 14,650-14,950/mt. Despite continuous recovery in the US, European Central Bank lowered its forecast for eurozone economic growth. A string of stimulus measures from China has not been absorbed by the market, leaving little direction to the market. Trading volumes and positions on LME zinc decreased as investors remained cautious. Zinc prices should have little upward or downward room.
19% are bearish, seeing LME zinc prices falling to USD 1,750/mt, and SHFE 1511 zinc contract prices dipping to RMB 14,500/mt. Market concerns remain now that China’s stock market is still volatile. A strong US dollar index will weigh on commodity prices. Sluggish crude oil prices and languishing emerging markets will also distress the market. Despite higher import premiums in Shanghai compared to other European and Asian regions, continuous inflows of imported zinc are expected due to the high SMM/LME zinc price ratio, weighing on domestic zinc prices.