Overseas economic data exceeded expectations. As the Fed's interest rate cut was expected to be postponed, the US dollar index strengthened. Nonferrous metals prices inched down. Affected by high energy costs and deteriorating market conditions, Nystar will carry out maintenance at the Budel zinc smelter with an annual capacity of 300,000 mt in the Netherlands in the second half of January 2024. The time of production resumption has not been decided. This sent zinc prices rising rapidly. However, LME zinc prices weakened amid a conganto of LME cash to the three-month contract, indicating that the spot market was still poor. Smelters were still restocking for Chinese New Year holidays. This, combined with the closed import window, tightened domestic spot supply. TCs of zinc concentrate remained weak, driving some smelters to cut output for maintenance. Zinc output in January should fall. Pre-holiday stockpiling improved the spot market noticeably. But real estate data in December remained downbeat. Some downstream companies will close this week. It is expected that operating rates will gradually weaken. Nonetheless, any downside room for zinc prices should be limited considering decreased supply, low social inventories and smelters already running at a loss regardless of by-products. Weak downstream consumption before CNY will also limit any gains in zinc prices. Zinc prices are expected to hover widely.
LME zinc is expected to trade between $2,400-2,600/mt.
The SHFE 2402 zinc contract prices are expected to move between 20,500-21,500 yuan/mt.
Spot premiums in China’s major markets are expected to stand at 70-150 yuan/mt.
