LIVE FUTURES REPORT 28/03: SHFE zinc prices strengthen amid positive fundamentals

Zinc prices on the Shanghai Futures Exchange were up during morning trading on Thursday March 28, managing to shrug off strength in the US dollar due to metal’s positive fundamentals.

The most-traded May zinc contract was at 22,525 yuan ($3,350) per tonne at 10.27am Shanghai time, up by 1.4% or 315 yuan per tonne from the previous day’s close of 22,210 yuan per tonne.

The contract hit an intraday high of 22,615 yuan per tonne earlier this morning, a level last seen in June 2018.

Persistent declines in exchange inventories have kept zinc prices underpinned, while a robust demand outlook also provided support.

Zinc stocks at London Metal Exchange warehouses dropped by 1,200 tonnes to 55,225 tonnes – a fresh low in 2019 – on Wednesday.

Deliverable zinc stocks at SHFE-approved warehouses declined by 8,064 tonnes to 115,974 tonnes in the week ended March 22.

“Downstream demand, especially from China, is expected to increase from the second quarter of 2019,” Fastmarkets analyst Andy Farida said.

“The demand outlook is set to improve amid large infrastructure and urbanization investment carried out by Chinese authorities,” Farida said, adding that infrastructure investment in China grew by 4.3% over January-February 2019, citing data from the country’s National Bureau of Statistics.

In copper, prices largely consolidated amid lackluster spot demand.

“Downstream [copper] consumers’ buying appetites are under pressure, evident by the narrowing spot premiums and rising spot inventories,” analysts with China’s Guotai Junan Futures said in a morning note.

Red metal stocks at SHFE-approved warehouses totaled 259,172 tonnes on March 22, up from the 2019 low of 97,979 tonnes reached on January 11.

Copper stocks in the Shanghai-bonded zone stood at 563,000-567,000 tonnes on March 25, marking the highest level since June 2017.

Other highlights
– Aluminium was the only other base metal on the SHFE to post a gain this morning, following a strong performance by the metal’s three-month price on the LME yesterday. The metal’s most-traded May contract on the SHFE was up by 45 yuan per tonne to 13,695 yuan per tonne as at 10.27am Shanghai time.
– Disappointing Chinese data released on Wednesday continues to dampen sentiment in the base metals market this morning, with prices on the SHFE broadly weak.
– Industrial profits in China fell by 14% year on year in January-February 2019. This compared with a 10.3% year-on-year increase in December 2018.
– A firm dollar also remains a headwind for the base metals; the dollar index, which gauges the strength of the US dollar against a basket of foreign currencies, was at 96.97 as at 10.56am Shanghai time compared with 96.62 at a similar time on Wednesday.
– In US data on Wednesday, the country’s trade deficit narrowed to $51.1 billion in January from $59.9 billion in the prior month. Exports stood at $207.3 billion and imports at $258.5 billion, compared with $205.4 billion and $265.3 billion respectively in the previous month.

Susan Zou

susan.zou@metalbulletinasia.com

Published

Susan Zou

March 28, 2019

04:05 GMT

Shanghai