Potential Rate Hikes Continued to Weigh on Zinc Prices

SHANGHAI, Feb 27 (SMM) - On the macro front, the second plenary meeting of the 20th Central Committee of the Communist Party of China began in Beijing last Friday.  The central bank’s fourth-quarter monetary policy operational report was released, noting that the financing costs have declined steadily and the balance sheets of high-quality leading real estate companies have been improved. In the short term, the inflation pressure is generally controllable, and China’s domestic consumption will pick up smoothly. The central bank and the China Banking and Insurance Regulatory Commission publicly solicit opinions on the "17 Financial Measures" of housing leasing, which support housing leasing companies with their own property rights by issuing loans for housing leasing. The US PCE price index released on Friday, the inflation indicator favoured by the Federal Reserve, did not slow down its year-on-year growth, and its MoM growth rate unexpectedly hit a five-month high.

Last Friday, LME zinc continued to weaken, and LME zinc inventory added by 2,750 mt to 33,400 mt. Expectations for overseas interest rate hikes pressured commodities as a whole. In addition, LME zinc was also weighed down by the production resumption of Auby smelters.

Last Friday, SHFE zinc fell below the 10-day moving average. On the supply side, due to power rationing in some areas, the domestic supply of zinc ingots in March may be about 13,000 mt lower than forecast. On the demand side, the recovery of domestic consumption is better than expected, therefore the fundamental support for zinc prices is still there. However, the bearish macro sentiment still dragged down SHEF zinc prices to close at 23095 yuan/mt.