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[SMM analysis] the zinc social bank is expected to steadily accumulate spot water or stabilize the low position.
Jun 20,2019 18:30CST
translation
Source:SMM
SMM June 20 news: into May, the domestic supply began to enter the accelerated recovery period, the upfront optimistic forecast is that June will reach the peak of the year, and swinging near the peak, supply growth in place, give a reasonable transport transfer time, will see the inventory stop falling back up to form a cumulative pool, the emergence of this inflection point also indicates that the previous expectations all landed according to the plan, the downward pressure of zinc in place at the same time.
The content below was translated by Tencent automatically for reference.

SMM, June 20 / PRNewswire-Asianet /-

Zinc pricing is supply-led, the current mine supply easing story has landed, mine easing to ingot loose transmission is also nearing completion, the direct follow-up indicator is: into June social inventories began to stop falling and rising. For spot, the relative balance between supply and demand is the transformation of supply exceeds demand, which also leads to a strong momentum of bulls in the June market, but the spot discount continues to expand, the two appear obvious splits, the performance of the present end of the goods has always tended to be flat.

The delivery of the Shanghai Zinc 1906 contract was completed this week, and the warehouse receipt jumped 19849 tons to 69692 tons on the delivery day, the highest warehouse receipt value in the year. At the same time, due to the return trend of the spot, the spot price on the delivery day tended to be flat with the futures price. Because the price difference between the current month and the next month quickly narrowed from about 1906 yuan / ton to less than 200 yuan / ton, the quotation followed the rapid decline after the month. However, for the month quoted arrogant discount 200 yuan / ton or so quickly narrowed to the small discount-Pingshui near, part of the delivery goods directly into spot trading lock profit, the current short position in this squeeze storm can be described as a complete victory, but that month delivery warehouse receipt 54800 tons follow-up will be how to perform the market still has some doubts.

However, after the replacement of the discount continued to expand to make an analysis, we can find that even if this part of the warehouse receipt temporarily does not enter the market circulation, the spot market does not have a greater supply pressure. Because consumption in Shanghai is mainly composed of two parts:

1) traders trade long orders in the current month. At the end of the week, most of the orders of traders ended, and most of the demand became weaker, and most of them did not constitute a transfer of goods rights, and their contribution to the deactivation of market inventory was limited, and although some warehouses could not be used as delivery warehouses, they were included in the approved warehouses for long orders, so there was no pressure on the demand for long orders for the time being.

2) actual consumption downstream. On the one hand, the consumption turns to the off-season, the order of galvanizing and die-casting zinc alloy weakens obviously, the purchase demand has already declined; secondly, under the stimulation of high profit, many stagnant small and medium-sized zinc smelters resume production, and this part of zinc ingots can not participate in the long single transaction, mostly through the actual consumption digestion with the price advantage, from May, the factory in East China has increased the proportion of direct hair to the factory and squeezed out a part of the downstream consumption. Finally, because the price comparison is not appropriate, and under the overseas squeeze pressure, the preservation pressure increases obviously, some of the imported zinc choose to hard landing directly into China, and also win the downstream favor with the price advantage in the form of direct hair to the factory. The direct result is that the downstream purchasing demand of Shanghai stock market is cooled, that is, inventory is transformed from implicit growth to dominant growth, and the transmission from smelter output to inventory will be more smooth.

Generally speaking, after the smelter output increases more smoothly to the inventory transmission, after the consumption is stable and weakens, the accumulation pool expectation and accumulation range will be further strengthened, the big probability of Shanghai zinc base difference will tend to be stable, the spot rising water push up power is insufficient, the low position will remain stable, the profit space limited spot trade activity degree may be difficult to heat up.

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