Focus on the Fed Meeting and Domestic Consumption This Week

SHANGHAI, Jun 13(SMM) - 

For LME zinc, what needs to be watched this week is the change at the macro level. A new round of US Fed interest rate decision in June will begin. Earlier, it was said that the interest rate will be raised by 50 basis points in June and July. In addition, the market needs to observe that whether there will be surprising hawkish speeches amid high inflation in the US and cheering economic data, which will become the biggest uncertainty in the overseas market. In terms of fundamentals, the European electricity prices move around 200 euros/MWh at present. Based on the prices, the current cost of smelters in Europe ranges from $3,900/mt to $4,000/mt. It should be noted that China's exported zinc ingots were delivered in Kaohsiung last week, resulting in a slight increase in LME inventories. In the future, the market shall see whether overseas market can fully consume China's exported zinc ingots to maintain low inventories. LME zinc prices are expected to move between $3,680~4000/mt.

For SHFE zinc, while the shortage of supply still remains, the expected increase in global zinc ore output this year reduced from 495,000 mt in metal content at the beginning of the year to 235,000 mt in metal content, which is affected by the shortage of overseas labour and the impact of domestic accidents and environmental protection policies. In June, TCs of zinc concentrate move in a downward trend, while the shortage of ore continued to pass through to smelters, resulting in the production control at some smelters. Coupled with the routine maintenance, the increase in China's refined zinc output is expected to move between 150,000-160,000 mt. The shortage of supply has provided support for zinc prices with high cost. And the positive expectations for the consumer side also provides support for zinc. Around June, a number of policies have been successively introduced, targeting infrastructure, real estate, automobiles and other terminal fields, boosting market confidence. The actual consumption was still weak, but the market shall hold bullish sentiment towards the future consumption. The demand needs time to rebound, and the fluctuation of consumption will not only determine the upside room of zinc prices, but also improve the SHFE front-month and next-month spread. In general, the upward space of zinc prices needs to be determined by the recovery of actual consumption. It is expected that zinc prices will move between 25,500-27,000 yuan/mt.