40% Investors Bearish toward Zinc Prices, SMM Survey

SHANGHAI, Dec. 1 (SMM) – LME zinc rallied above USD 1,600/mt level last week, but rolled back early gains and fell to USD 1,550/mt last Friday. How will LME zinc move this week? SMM surveyed 30 market players to find that:

50% see LME zinc consolidate between USD 1,520-1,600/mt, and SHFE 1602 zinc fluctuate between RMB 12,500-13,200/mt. News that metal smelters will cut output and China’s State Reserve Bureau (SRB) is expected to build aluminum stocks should arrest declines in LME zinc. But smelters will sell aggressively to generate cash at the year’s end. Meanwhile, operating rates at downstream producers will be constrained by cold weather in North China, weighing on zinc prices. European Central Bank (ECB) and US Federal Reserve will announce their interest rate decision for December in the latter half of this week, and investors should remain reticent ahead of the results, with shorts and longs leaving the market for risk aversion.

See SMM Price Forecast, please click:LME Zinc to Inch Down Next Week, SMM Says

40% are bearish, expecting LME zinc to fall to USD 1,500/mt, and SHFE 1602 zinc to dip to RMB 12,400/mt. They base their opinion on unpromising official and Caixin’s November manufacturing PMI in China, which will depress market sentiment. The ECB is expected to expand quantitative easing in December, weakening the euro and driving up the US dollar. In this scenario, base metals prices will not stop falling.

10% are bullish, expecting LME zinc to rise to USD 1,650/mt, and SHFE 1602 zinc to rebound to RMB 13,500/mt. The People’s Bank of China (PBOC) executed RMB 100 billion in Medium Term Lending Facility (MLF) last Friday to inject liquidity to the market, and lowered MLF interest rate, so as to decrease financing cost. This inspired the market. Moreover, Chinese zinc smelters will cut output next year, followed by nickel smelters. China’s SRB is considering building at least 1 million mt of aluminum stocks in the near term, and some zinc stocks. TCs of imported zinc concentrate also trend down. As such, LME zinc prices should stop falling.