SHANGHAI, Oct 9 (SMM) – SMM retains a pessimistic outlook on the near-term Shanghai zinc prices as high treatment charges will continue to boost production, even as a less-than-expected accumulation in zinc social inventories over the National Day holiday pulled up prices on October 8.
Without any significant development on the macro side, the most-active SHFE November zinc contract is seen hovering between 18,400-19,000 yuan/mt.
Domestic zinc supply is expected to grow in October as smelters ramp up output on high margins and low inventories after they returned from previous maintenance and as limited seaborne materials flow in. Production bottleneck facing some smelters will cap the increase in overall supply.
Downstream consumption in the galvanising, die casting zinc alloy, and zinc oxide sectors improved since mid-September, as evidenced by larger-scale destocking the week before the holiday, and this will underpin nearby zinc prices.
SMM data showed that social inventories of refined zinc across Shanghai, Tianjin and Guangdong shrank 13,900 mt week on week as of Monday September 30, greater than the declines over the week before holidays in 2018 and 2017.
For LME zinc, lower inventories and potential tighter supplies will remain supportive of prices even as fundamentals indicate limited upward momentum. Market participants will continue to look for cues from the US-China trade talks.
Official data showed that zinc inventories across LME-approved warehouses fell 2,975 mt from September 30 to stand at 64,325 mt as of October 7.