SHFE and LME Zinc Both Showed a V-Shaped Trend amid a Mix of Bullish and Bearish Factors

SHANGHAI, Mar 8 (SMM) - On the macro front, Federal Reserve Chairman Powell emphasised at the hearing of the House of Representatives that no decision had been made regarding the pace of interest rate hikes. He also reiterated that economic data would be an important reference and interest rate hikes would be accelerated if necessary to rein in high inflation. The Beige Book of the US Fed mentioned that in early 2023, overall economic activity in the United States has increased slightly. Inflationary pressures remain prevalent, although price increases have slowed down in many regions. It is expected that the price increase will continue to ease this year. Private payrolls increased by 242,000 in February, stronger than the expectation of 200,000. On the release of ADP numbers, the chance that the US Fed will raise the interest rate by 50 basis points in March rose to 75% In addition, JOLTS readings were better than expected again, showing that there were 10.82 million job vacancies. The data from the China Passenger Car Association showed that retail sales of passenger vehicles in the narrow sense increased by 10.4% year-on-year in February. The retail sales of the new energy passenger cars stood at 439,000 vehicles in February, up 32.8% on the month and 61% on the year.

Overnight, LME zinc opened at $2,951.5/mt and closed up $28/mt or 0.95% at $2,975/mt. Transaction volume rose to 8,395 lots, and open interest decreased by 62 lots to 191,000 lots. LME zinc inventory shed by 50 mt to 39,075 mt.

Overnight, the most-traded SHFE 2304 zinc contract opened at 23,230 yuan/mt and closed at 23,310 yuan/mt, up 40 yuan/mt or 0.17%. Trading volume was reduced to 49,077 lots, and open interest lost 941 lots to 81,451 lots.

Fed Powell's comment relatively softened last night, but the market’s expectations for a 50 basis-point interest rate hike in March were still high. Fundamentally, China’s refined zinc output in February stood at 501,400 mt according to SMM survey, which barely changed and was in line with forecast.  In terms of capital factors, it is still uncertain whether the bullish news released during the Two Sessions will live up to market expectations. Therefore, zinc prices will still move sideways in the near term.