SHANGHAI, Jan 3 (SMM) - In terms of LME zinc, the impact from the news front was small last week due to the Christmas holiday. Fundamentally, the natural gas inventory in Europe has dropped recently, while the wind power generation in the first quarter next year will be limited owing to seasonal factor. Considering that the cold winter will accelerate the consumption of natural gas, SMM thinks it is unlikely for smelters in Europe to resume the production massively. To put it another way, the suppliers still face huge pressure, which is also the reason why LME zinc inventory has not accumulated yet and the low inventory continues to bolster futures prices. The following attention shall be paid to the rate hikes overseas to see whether it will bring greater impacts on the economic activities. If the consumption weakens further, then the changes in supply and demand will be foreseeable. Generally, LME zinc prices are expected to decline and move between $2,900-3,100/mt.
In terms of SHFE zinc, the Chinese state downgraded Covid-19 to a Category B infectious disease last week when people’s daily life was returning to normal after the first wave of infections. For example, the traffic congestion in Beijing and other big cities resumed. As the market concerns over the impacts brought by the Covid-19 infections were relieved, the zinc prices picked up. However, it should be pointed out that the operating rates of zinc-related downstream sectors actually decreased further, and the consumption of ferrous metals also continued to retreat. This suggests that Covid-19 pandemic and the Chinese New Year holiday still weighed on the operating rates of processing enterprises and terminal companies. Therefore, the sluggish demand will lead to enduring accumulation of inventory at a sharper pace. On the whole, SHFE zinc is forecast to drop to 22,500-24,000 yuan/mt. Investors are suggested to go short when zinc prices rebound.
