Zinc: Inventory buildup on week depresses market confidence
SHANGHAI (Scrap Register): The two political sessions and environmental issues prevented consumption from recovering considerably, and this slowed destocking. Output of refined zinc grew in March, but production bottlenecks lingered, according to SMM.
Total zinc inventories across the three major markets of Shanghai, Guangdong, and Tianjin increased some 8,000 mt last week, to 223,100 mt, and this lowered market confidence. Higher inventories and market talk of zinc selling by the State Reserve Bureau (SRB) dragged on zinc prices.
Prices may receive support after initial declines this week if downstream consumption picks up. Resumption of demand after the political sessions will determine prices in the weeks ahead.
SMM expects LME zinc prices to fall to $2,660-2,760/mt this week. The SHFE May contract is expected to trade at 21,100-21,700 yuan/mt and test support from the 40-day moving average.
Spot zinc in Shanghai is expected to trade with discounts of 30 yuan/mt to premiums of up to 10 yuan/mt over the SHFE front-month contract.