SHANGHAI, Mar 22 (SMM) – SHFE zinc is likely to stay rangebound at lows with strong upward resistance in the short term, given high inventories and a slow recovery of consumption, SMM expects.
The 1805 contract fell below the 24,500 yuan/mt level at the end of the day on Wednesday March 21. Overall momentum was weak as inventories were high.
Despite production cuts from maintenance works at some smelters, China’s output of zinc is likely to rise 8.5% in the first quarter of 2018 from the same period in 2017, given adequate supplies of ore in and beyond China.
Downstream consumption did not recover significantly as the two political sessions and heavy air pollution limited orders in north China. The north is a major consumer of zinc. After the Chinese New Year holiday, inventories in China rose to 265,000 mt.
LME inventories also jumped from over 140,000 mt in early March to exceed 210,000 mt as of Tuesday March 20.
The momentum of zinc was limited by global developments such as the US interest rate hikes, tariffs on steel and aluminium imports and personnel changes in the White House.
During China's two political sessions, the market remained cautious and adopted a watch-and-wait approach.
In the long term, SMM expects zinc prices to inch up in April after a round of environmental inspections are completed.
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