Market Holds Optimistic Expectations on Post CNY Zinc Consumption

SHANGHAI, Jan 24 (SMM) - This week’s focuses including the initial value of January manufacturing PMI in the Eurozone, the initial value of the US Markit manufacturing PMI in January, the US Fed’s interest rate decision on January 26, the Eurozone's January economic sentiment index; China's official January manufacturing PMI, and China's January Caixin manufacturing PMI. The IMF will announce the World Economic Outlook report on Tuesday; the US Fed will announce the interest rate decision on Thursday, and the Fed Chairman Powell will hold a monetary policy press conference.

The US, Britain, France and Germany have formed a consensus on the Russia-Ukraine issue. US President Biden said that if any Russian troops enter Ukraine, the Kremlin will "pay a high price" for this. The geopolitical issue remains unresolved, and there is no further news on Nord Stream 2 plan. The electricity prices in Europe remained rangebound last week, which is likely to sustain in the short term. On this basis, the zinc stocks across LME-listed warehouses declined more significantly, and the spot premiums over LME zinc rose to $300-350/mt. The zinc ingot shortage is still intensive. The overall overseas sentiments are optimistic, and the LME lead is expected to trade between $3,520-3,680/mt this week.

In the SHFE market, the downstream users gradually took holidays last week for the CNY. At the same time, the downstream purchases weakened significantly as the zinc prices rose above 25,000 yuan/mt, and the restocking for the CNY was about to end. The SHFE zinc stocks increased by 10,500 mt to 133,600 mt. The inventory is expected to rise further by 15,000-20,000 mt, which will gradually weigh on the prices. The market participants hold a consistent expectations that the inventory increase during the CNY will be low, and the consumption will be robust after the CNY holiday, which has been reflected in the prices. SMM will monitor the market fundamentals and whether the expectations will materialise. The zinc prices are expected to remain volatile. The most-traded SHFE contracts prices are expected to stand at 24,200~25,500 yuan/mt this week, and the spot premiums will stand at 0~40 yuan/mt over the SHFE 2202 zinc contract.