SHANGHAI, Mar 16 (SMM) – Prices of zinc futures in the Shanghai market are likely to stablise, from declines in March, as demand grows and consumption improves, SMM data showed.
Zinc prices weakened in early-March as operations recovered at concentrate mines but operation rates at smelters remained unchanged. A subsequent drop of 77,000 mt in LME inventories rattled the market and led to the slump in LME and SHFE zinc. Downstream consumers purchased actively during the slump and resumed regular operations. This drove consumption.
The SMM zinc processing demand surprise index (ZPDSI), a key measure of downstream zinc demand in China, stood at -84 in January, -69 in February, and is likely to hit 69 in March. This suggests that downstream consumption will pick up in March and that SHFE prices will rally.
The ZPDSI is released around the 15th of each month. A positive reading (above zero) shows that demand is above market expectations while a negative reading shows that demand is below market expectations. A reading higher than 50 indicates that prices of futures are likely to rise while a reading below -50 indicates that prices of futures are likely to fall.
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