The Production at Smelters Remains as the Market Focus

SHANGHAI, Nov 1 (SMM) - The focus this week includes: The Fed’s FOMC meeting, coal price trends, final value of October Manufacturing PMI in Eurozone, final value of US October Markit Manufacturing PMI, October ISM Manufacturing PMI, October ADP Employment, October unemployment rate; China's October Caixin Manufacturing PMI and October Caixin Service PMI. In terms of events, FOMC will announce the interest rate resolutions this Thursday; the Fed Chairman Powell will hold a press conference; the Bank of England will announce interest rate resolutions, meeting minutes, and monetary policy reports; and European Central Bank President Lagarde and Executive Committee Member Schnabel will deliver speeches. Focus should be paid to a series of data published by the Fed this week, and whether the FOMC meeting will put forward further guidance on the taper policy. The market has strong expectations for taper in November, and the prices have basically been priced in. If the meeting adjusts the interest rate hike estimate next year, it will affect the market's long-term expectations. Fundamentally, the biggest problem overseas lies in European electricity prices and the operation of smelters. The losses at smelters have expanded to $300/mt. Attention should be paid to whether there will be new adjustments in the production of smelters. On the other hand, zinc stocks in Europe continue to decline, which is currently at a low level of 9,825 mt. Spot premiums in Europe have risen to $200/mt. Similarly, LME zinc also has the basis for squeezing. LME zinc prices are expected to stand at $3,270-3,450/mt this week.

Zinc prices declined last week amid government’s regulation of coal prices. The sharp drop in coal prices has led to a significant correction in the overall industrial products. The willingness of processing enterprises and end-users to buy goods was extremely weak. SHFE zinc prices fell 4.88% intraweek. Multiple mines reduced their output amid power rationing in Inner Mongolia, tightening the supply of zinc concentrate. TCs fell 100 yuan/mt to 3,950 yuan/mt last week. Yuguang Gold Lead and Huludao Zinc Industry have resumed production. The output of zinc ingots is expected to stand at 501,000 mt in October, and rise to 510,000 mt in November, but could hardly return to the peak level in the short run. The consumption is likely to increase with the stabilisation of market sentiment. The inventory is unlikely to accumulate without the replenishment of government stockpiles. The most-traded SHFE zinc contracts are expected to stand at 22,800-25,000 yuan/mt this week, and spot discounts of Shanghai zinc to move between 30-0 yuan/mt over the December contract.