Preholiday stockpiling, low stocks buoy SHFE zinc prices

SHANGHAI, Sep 19 (SMM) – The most traded SHFE zinc contract jumped for two consecutive days and broke through 21,000 yuan/mt as of Wednesday September 19 on limited cargoes that can be delivered, low stocks and preholiday stockpiling, SMM believes.

The metal also shrugged off the pressure from the US-China trade disputes after the two world’s largest economies announced the latest round of tit-for-tat tariffs on each other’s goods earlier this week.

SMM expects the contract to climb to the band of 21,800-22,000 yuan/mt ahead of the National Day holiday, starting from October 1.

As of Friday September 14, Shanghai-bonded stocks came in at 76,000 mt, standing 33.9% lower than the corresponding period last year. Meanwhile, social inventories across Shanghai, Tianjin and Guangdong stayed at low levels. The figure stood at 116,900 mt as of Monday September 17, compared to some 260,000 mt seen at the beginning of the year.

SMM also expects limited growth in September’s output given maintenance works at Western Mining, Yuguang Zinc Industry and Hechi Nanfang as well as Zhuzhou Smelter’s moving of its capacities. Some smelters in Shaanxi and Hulunbuir Chihong in Inner Mongolia have yet to recover their full output.

Supply of cargoes that can be delivered was tight across the market. There were limited inflows of imports that can be delivered amid an import arbitrage window.

SMM sees mild gains in operating rates across Chinese galvanising plants, zinc oxide producers and manufacturers of zinc alloy and die-castings this month, according to its research. While September is the traditional high season, the consumption side is likely to remain weak. Preholiday stockpiling, however, is set to drive up demand and provide some support to zinc prices.