Negotiations on The Debt Ceiling Grew Risk Aversion, SHFE And LME Zinc Prices Continued To Fall Last Week

LME zinc: At the beginning of the week, the debate on whether to raise interest rates in June continued. At the same time, the negotiation on the debt ceiling issue did not seen progress. Strong bearishness sentiment weighed down LME zinc. The initial value of the Markit manufacturing PMI in the United States in May recorded 48.5, returning to below the line of prosperity. The initial value of the eurozone’s manufacturing PMI in May fell again. The performance of overseas manufacturing was weak. The US dollar index continued to fluctuate at a high level; the number of initial jobless claims in the United States in the week of May 20 was lower than expected and recorded 229,000, and the US dollar index rose. LME zinc inventories jumped 40% in a day. But an optimistic signal over the debt ceiling issue allowed LME zinc prices to rebound. As of 18: 30 last Friday, LME zinc closed at $2,323/mt, with a weekly drop of $153.5/mt or 6.20%.

SHFE zinc: At the beginning of the week, the risk aversion sentiment in the market continued to heat up. SHFE zinc prices fell sharply with LME zinc prices.  There is a large volume of new secondary zinc capacity, and output at smelters remains high. The supply is expected to increase significantly. SHFE zinc prices dropped by more than 800 yuan/mt in a single day, and led losses of non-ferrous metals prices. Imported zinc also increased supply pressure. This, combined with no improvement in real estate market, caused SHFE zinc prices to fall below 19,000 yuan/mt. With the recovery of macro sentiment and the sharp drop of social inventories, SHFE zinc prices rebounded to above 19,000 yuan/mt. As of 15: 30 CST last Friday, SHFE zinc prices closed lower at 19,285 yuan/mt, with a weekly drop of 1,360 yuan/mt or 6.59%.

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