Bearish Market Sentiment Weighed on LME Zinc Prices

SHANGHAI, Apr 20 (SMM) – The US economic activity has been little changed in recent weeks, with job growth slowing down and price increases appearing to have slowed down as well, according to the Federal Reserve's Beige Book released Wednesday. Eurozone inflation eased in March, but the underlying inflation remained high, Eurostat said as preliminary economic data raised concerns from the European Central Bank about continued price pressures. Oil exports shipped from Russia’s western ports in April have risen to the highest level since 2019. Eurozone bond yields the highest level in more than a month, with investors bracing for a further rise in interest rates as concerns about the financial system recede and policymakers call for tighter policy.

Overnight, LME zinc opened at $2,859/mt and closed at $2,791.5/mt, down $58/mt or 2.04%. Trading volume stood at 9,730 lots, and open interest lost 29 lots to 172,000 lots. The weaker consumption overseas amid bearish market sentiment caused the LME zinc cash-to-three-month backwardation to expand to $9/mt. The LME zinc prices lacked momentum.

The most-traded SHFE zinc 2305 contract opened at 21,980 yuan/mt and finally settled at 22,080 yuan/mt, down 270 yuan/mt or 1.21%. The trading volume was 39,000 lots, and open interest was reduced by 2,056 lots to 76,000 lots. The most active SHFE zinc contract is about to switch to the June contract.

With regard to zinc supply in China, although the power rationing in Yunnan has little impact on the local output of #0 zinc ingots, the secondary zinc smelters are more sensitive to power shortage and most of them cut or suspend production. The tightened crude zinc supply hurts the purchasing willingness of some downstream buyers, but thankfully it only has a limited impact on SHFE zinc prices.