Analysis: Zinc price sees further upward room
As the SHFE 1803 zinc contract refreshed its 10-year high and touched 27,235 yuan/mt on Monday January 29, SMM believes new highs may continue to be made.
Such strong momentum can be attributed to stronger Chinese yuan, declining inventory, and more fund liquidity.
With LME zinc inventory coming down to below the 180,000 mt level and a spot premium of over $20/mt, more warrants have been cancelled and market sentiment remained bullish.
In China, zinc concentrate supply stayed tight. Deliveries have also been affected due to poor weather. Social inventories in the three major markets have declined for two consecutive weeks to just below 140,000 mt, according to SMM data.
In addition, an inflow of 514 million yuan to the SHFE zinc contracts indicated better fund liquidity and investor enthusiasm.
We maintain our view that zinc would stay firm in the first half of this year but a small correction is expected in the near term.