SHFE Zinc Rose for Three Days in A Row and Broke through 23,000 yuan/mt as Bullish Macro Factors Outweighed Poor Fundamentals

SHANGHAI, Jul 27 (SMM) –Boosted by multiple positive news, SHFE zinc has risen for 3 consecutive days, and exceeded 23,000 yuan/mt. As of yesterday’s close, the most-traded SHFE zinc contract stood at 23,110 yuan/mt, an increase of 1.4%.
The average spot price of SMM 0# zinc ingot was 23,180 yuan/mt yesterday, an increase of 770 yuan/mt or 3.4% from the low on July 15.
Russia said that its Nord Stream No. 1 natural gas pipeline will have another turbine shut down for maintenance, which will lead to a reduction in natural gas transmission. Concerns about energy supply made European natural gas and electricity prices rise again, and the energy crisis will continue to have big impact on zinc prices in the medium and long term. 
According to SMM's latest survey, due to the influx of overseas zinc ore, the average TCs of domestic zinc concentrate has recently been raised to 3,700 yuan/mt in metal content, thus the cost support has weakened slightly.  
From the perspective of consumption, exports in the three major zinc downstream sectors have not seen a significant increase. The exports of galvanized sheet and zinc alloy in June both decreased year-on-year, and there have been very few new export orders so far. In terms of inventory, according to SMM data, as of July 25, the social inventory of zinc ingots in seven major markets in China totalled 143,100 mt, a drop of 5,400 mt when compared with last Friday, which supported zinc prices to a certain extent. The main reason for the decline in inventory was limited arrivals. 
From January to June, completed fixed asset investment (excluding real estate) increased by 18.8%, and the central government helped Evergrande to restructure, all of which reassured market confidence to a certain extent. The US Fed has not released hawkish remarks, easing pressure on commodities. Market expects stimulus policies from the Politburo meeting to be held at the end of the month. 
SMM expects zinc prices to remain firm on the back of optimism over the upcoming Politburo meeting.