SHANGHAI, Sep 26 (SMM) – In terms of LME zinc, the US Fed decided to raise the interest rates by 75 basis points last Thursday. At the same time, Powell made a super-hawkish remark that the policies would be adjusted to bring the inflation down to 2%, suggesting a prospect of a 100-125 basis-point hike. This indicated that the macro pressure will continue to exist. It should also be noted that the prices of metals did not fall as expected in the wake the interest rate meeting, which was thanks to the strong fundamental support at home and abroad. On the one hand, the uncertainty of the Russia-Ukraine conflict increased because of the partial military mobilisation in Russia. As a result, the energy shortage in Europe will extend. On the other hand, the LME inventory fell further rapidly last week, with 14,125 mt of goods in the warehouse in Klang transferred to the European market. This was also the evidence of strong demand in the overseas market. On the whole, the fundamentals stayed resilient under the macro pressure, and it is expected that LME zinc will remain rangebound this week, running between $3,000-3,200/mt.
In terms of SHFE zinc, the continuous decline in inventory remained the strongest support for the spot prices. As of September 23, the zinc stocks in September had fallen 30,600 mt, and the price difference between SHFE 2210 and 2211 contracts was maintained at above 400 yuan/mt. The low inventory once again boosted the market confidence in the recovery of consumption. The spot prices varied in different markets last week. As the downstream enterprises in Zhengjiang and Jiangsu provinces had finished stockpiling, goods holders were compelled to sell off amid extremely scarce trades, thus the premiums in east China plummeted. In north China, sufficient inflows of zinc ingots offset the decrease in market arrivals caused by the pandemic in Inner Mongolia. Therefore, downstream enterprises basically started purchasing last week, providing a support for local premiums. In south China, the rigid demand from downstream buyers remained low, which caused the premiums to fall, hence smelters preferred transferring their zinc ingots to the markets in east and north China. Generally speaking, the spot premiums before the National Day holiday are likely to trend lower. Market participants are suggested to pay attention to the inventory before and after the National Day holiday in the short term or the change in supply and demand in the long run. SHFE zinc prices are expected to continue fluctuating between 23,500-25,000 yuan/mt in the short term.
