33% Chinese Investors Bullish toward Zinc, SMM Survey

SHANGHAI, Aug. 2 (SMM) – SMM survey of 30 industry insiders finds that 54% are neutral, expecting LME zinc to fluctuate between USD 2,200-2,280/mt and SHFE 1609 zinc to fluctuate between RMB 16,900-17,500/mt. The Bank of Japan left interest rate unchanged last Friday, and expanded ETF purchase to JPY 6 trillion. Investors expect the Bank of England to lower interest rate by 25 basis points in August, but will remain cautious before the announcement of the bank’s rate decision. Positions increased over 10,000 on Monday, but SHFE 1610 zinc is expected to meet pressure from RMB 17,500/mt in the foreseeable future.

Zinc to Fall Further Next Week, SMM Foresees

About 33% are bullish toward zinc price trends this week, expecting LME zinc to advance to USD 2,300/mt, and SHFE 1609 zinc to climb to RMB 17,800/mt. China’s zinc concentrate imports fell nearly 30% in H1, allowing some smelters to scramble for domestic ore. Domestic zinc concentrate TCs fall RMB 100/mt from July to RMB 4,700-4,900/mt(Zn content) in August, with quotes below RMB 5,000/mt at most smelters. Domestic zinc concentrate TCs are expected to slide further. Lower TCs should force smelters to slash output, and bolstering zinc.

Some 13% are bearish, seeing LME zinc fall to USD 2,150/mt. SHFE 1609 zinc is expected to drop to RMB 16,800/mt. Crude oil prices posted a 6-day losing streak, falling to USD 40/bbl, with concerns over oil oversupply remaining. Zinc inventories in Guangdong climbed to 126,800 mt, the highest for the year. Inventories at cargo holders were high due to slow sales. SMM understands the average operating rate at zinc alloy producers will slide at least 1% due to environmental protection inspections for G20 Summit, which will be implemented in Hangzhou, Ningbo and Wenzhou. This will also depress zinc consumption, and in turn weighing on zinc prices.