SHFE and LME Zinc Prices Plunged Amid Macro Bearishness

LME zinc: The US business activities expanded more than expected in April, and Markit’s manufacturing PMI recorded 50.4. The composite PMI hit a nearly one-year high, pushing up inflation risk. This, combined with the surge in LME zinc inventories, lowered LME zinc prices after opening.

Negative news from First Republic Bank fuelled market panic about the banking crisis. Overseas recession expectations lingered. LME zinc prices fell and then rallied. As of 15: 00 CTS last Thursday, LME zinc prices closed at $2,620/mt, with a weekly drop of $98/mt or 3.61%.

SHFE zinc: At the beginning of the week, SHFE zinc prices fell with LME zinc prices as the market was awaiting the Federal Reserve’s interest rate decision. Market panic over the First Republic Bank of the United States pushed down LME and SHFE zinc prices. Meanwhile, downstream consumption remained weak and new orders were limited. As such, SHFE zinc prices fell below the 21,000 yuan/mt mark. The bearish sentiment in the market grew. On the other hand, spot trades were brisk on the back of pre-holiday stockpiling. Continuously falling social inventories underpinned zinc prices.

Expectations of lower supply in the wake of power rationing in Yunnan also bolstered zinc prices. The contract returned to above 21,000 yuan/mt. As of 15: 00 CST last Thursday, SHFE zinc prices closed down at 21,110 yuan/mt, with a weekly drop of 770 yuan/mt or 3.52%.