SMM Zinc Market Daily Review (2015-11-9)

SHANGHAI, Nov. 10 (SMM) –SHFE 1601 zinc contract prices opened at RMB 13,510/mt last Friday evening, then dropped to RMB 13,450/mt, and hovered around RMB 13,520/mt, and closed at RMB 13,530/mt, up RMB 40/mt or 1.57%. Trading volumes were 171,000 lots, and total positions increased 3,416 to 162,000. SHFE 1601 zinc contract prices opened at RMB 13,530/mt on Monday, and hovered around RMB 13,500/mt, touching as high as RMB 13,595/mt. SHFE 1601 zinc contract prices closed at RMB 13,525/mt, up RMB 35/mt. Trading volumes were down 53,000 to 307,000 lots. Total positions increased 6,030 to 165,000.

#0 zinc prices were between RMB 13,690-13,780/mt, RMB 150-240/mt above SHFE 1512 zinc contract prices. #1 zinc traded at RMB 13,590-13,600/mt. Imported zinc were RMB 20/mt below or RMB 40/mt above SHFE 1601 zinc contract prices. Supplies of some brands grew, weighing on spot premiums. Prices spreads between domestic zinc narrowed, with the price gap between domestic #0 zinc and imported zinc contracting further. Downstream buyers purchased as needed, with overall transactions quiet and traded prices between RMB 13,680-13,780/mt in the afternoon

LME zinc prices dropped to test USD 1,650/mt last week. Will LME zinc stop falling this week?

SMM surveyed over 30 market players to find that 60% see LME zinc prices stabilize between USD 1,640-1,700/mt, and SHFE 1601 zinc contract prices move between RMB 13,400-13,800/mt. Glencore cut its zinc concentrate output target by 100,000 mt (zinc content) in 2015, and this is expected to inspire market sentiment. But most investors stay cautious as global zinc concentrate supply will not enter deficit territory any time soon. TCs of imported zinc concentrate were lowered to as low as USD 150-160/dmt recently, but trading was limited. TCs of China’s domestic zinc concentrate trend upward in some regions given ample supplies. Some bargain hunters entered the market recently, giving some support to zinc prices.

23% are bearish, expecting LME zinc prices to fall to USD 1,600-1,630/mt, and SHFE 1601 zinc contract prices to drop to RMB 13,280/mt. Chinese economic indicators slated for release this week are not promising. China’s import and export numbers in October both fell short of market expectations. Meanwhile, the US dollar surged to 99 on top of upbeat US non-farm payrolls, weighing down zinc prices. Besides, galvanizers in North China will be affected due to the winter season, and this should dampen zinc consumption. When combined with shipments expected to arrive in North China this week, zinc prices should be negatively affected.

17% are bullish, seeing LME zinc prices rise to USD 1,700/mt mark, and SHFE 1601 zinc contract prices to climb to RMB 14,000/mt. It was reported some mines will delay commissioning of projects or cut output, and this will underpin zinc prices. On fundamental side, combined inventories in Shanghai, Guangdong and Tianjin fell last week. When coupled with lower inflows of imported zinc and smelters holding back goods, zinc prices should receive a lift. As of November 6, LME zinc inventories fell 23,000 mt compared to a month earlier.