SHANGHAI, Apr. 7 (SMM) - SHFE May zinc contract fell after opening and plunged at the end of trading, finishing 4% lower on Friday due to strong short momentum. Positions on SHFE zinc increased 29,000 tonnes.
Supply tightness eased recently after restarts at mines driven by high zinc prices, SMM said. Meanwhile, market confidence weakened toward consumption now that recoveries of end-user orders were slow. Frequent environmental protection inspections also constrained operation at North China-based galvanizers.
Breaking News: What Triggers Wide-Spread Declines in China Base Metals Market on Friday? SMM Reports
Besides, zinc prices have remained above 20,000 yuan per tonne over the past six months, moving around 22,800 yuan per tonne from the beginning of 2017. This is also believed to have grown short sentiment. Technical indicators also point to mounting upward pressure.
SMM reckons zinc will stay high in the near and medium term. The release of ore supply will be slow. Zinc smelters will only report limited output growth because of low zinc concentrate inventories. At the same time, inventories will fall as consumption improves with warmer weather.
Zinc ingot output declined 1.7% month-on-month in March, and fell 3% in April, according to an SMM survey. Output fell 20,000 tonnes year-on-year in the first four months of the year.
As of April 7, total zinc inventories in Shanghai, Guangdong and Tianjin decreased 1,400 tonnes to 259,500 tonnes, SMM data show.
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