SHFE zinc plunges amid pessimistic sentiment

SHANGHAI, Apr 12 (SMM) – SHFE zinc tumbled during the day and touched a low at 23,605 yuan/mt on Thursday April 12 despite better fundamentals since the start of this month.

This is mainly because sentiment turned bearish when market talk suggested that China’s State Reserve Bureau may release 50,000-60,000 mt of zinc ingot to be received by some state-owned enterprises.

Speculative investors took advantage of such information and added their short bets, pressuring zinc prices. Over 100,000 lots were added to SHFE zinc positions during the day.

However, whether the State Reserve Bureau would release the metal could not be verified at the time of writing.

In addition, LME warrants have grown over 20,000 mt to 166,050 mt over the past week. Geopolitical risks such as the intensifying US-China trade war, US sanctions on Russia and Syria crisis have all weighed on the market and led investors to be more risk averse.

On the fundamentals front, zinc concentrate treatment charges (TCs) remained at low levels in April, when output from smelters is expected to be 3.4% lower from March due to maintenance works, SMM survey showed.  

Galvanising plants and zinc oxide producers in Hebei province and Tianjin have resumed normal operations as the weather improved. Demand in east and south China were stable. Inventories in Shanghai, Guangdong and Tianjin have declined for four consecutive weeks and are expected to fall further as demand recovers.

SMM believes that technical factors accounted for the weakness in zinc prices.

For editorial queries, please contact Daisy Tseng at daisy@smm.cn 
For more information on how to access our research reports, please email service.en@smm.cn