SMM Zinc Market Morning Review (2015-5-20)

SHANGHAI, May 20 (SMM) – European Central Bank said it will accelerate Quantitative Easing, pushing down the euro whilst driving up the US dollar index. The number of US housing starts hit a 7-year high, allowing the US dollar index to return to 95, weighing down base metals prices. LME zinc prices dropped below USD 2,280/mt, falling to USD 2,227.5/mt, and closing at USD 2,235/mt, down USD 48.5/mt or 2.12%. Trading volumes increased 4,139 to 11,090 lots, and total positions fell 1,329 to over 342,503. LME zinc inventories fell 2,575 to 430,000 mt.

SHFE 1507 zinc contract prices opened at RMB 16,770/mt Tuesday evening, then fluctuated around RMB 16,650/mt, and closed at RMB 16665/mt, down RMB 170/mt or 1.01%. Trading volumes increased 49,406 to 78,528 lots, and total positions fell 7,516 to 98,092.

European Central Bank said it will push Quantitative Easing during May-June, pushing the euro down 1.46%, its most significant daily loss over the last two months. The US dollar index thus broke through 95, sending commodity prices down.

European major economic indicators released yesterday were sluggish. ZEW’s May economic climate index for Germany weakened, and trade data also dropped on the month, with European inflation rate low. UK’s CPI in April entered negative territory for the first time since 1960, allowing the GBP:USD to plunge 1%. US housing data, however, were upbeat, causing the probability of an earlier interest rate hike by the Fed to increase. The number of US housing starts in April was 1.135 million, hitting a 7-year high. US construction permits in April were 1.143 million, pushing the US dollar index up further.

Global stocks markets mostly rose. LME base metals prices dropped across the board with the exception of tin.

LME zinc prices are expected to move between USD 2,225-2,265/mt today. SHFE 1507 zinc contract prices will fluctuate between RMB 16,650-16,750/mt, with spot discounts of RMB 100-80/mt against SHFE 1507 zinc contract prices.