SHANGHAI, Jan 16 (SMM) - The strong performance of industrial metals last week was mainly driven by the world's optimistic expectations for a recovery in China's economy, while the players also expected to see the end of most economies’ tightening monetary policy following the peak inflation in the US. Although the domestic market participants were still concerned about the weak fundamentals, the overseas market players believed that China’s flexible monetary and fiscal policies boded well for a strong economic recovery, while a recession, in their opinion, was more likely for the US.

In Europe, the electricity prices last week dropped from highs, and the natural gas inventory was on the rise amid a warm winter. In this scenario, the smelters started to resume the production last week. In fact, the zinc output in overseas smelters already increased on a weekly basis, and it is worth attention whether the smelters will speed up the production resumption in the coming weeks.

In China, zinc ingot social inventory continued to accumulate last week, accompanied with common increases in the inventories of all non-ferrous metals upon the upcoming CNY holiday this year. However, the downstream enterprises were closed early this year, which means that the rising stocks still remained in the warehouses rather than being traded. Since the market has been optimistic about the production resumption after the holiday, SMM will keep track of the post-holiday operating rates of enterprises.

In terms of futures prices, the longs are still active and the zinc prices are inclined to surge in the short term. However, as the momentum is insufficient for both SHFE zinc and LME zinc, it is expected that the trades will be scarce in the domestic market before the holiday.

SHFE zinc is expected to move between 22,900-23,500 yuan/mt and LME zinc between $3,240-3,310/mt.