Chinese Zinc Futures Prices May Fall in The Short Term - Analysts

SHANGHAI, May 7 - Zinc futures prices on the Shanghai Futures  Exchange  (SHFE)  may slide in the short term on falling demand and increasing supply, an analyst said on May 6th.

"Zinc prices  have  rebounded  too  rapidly  recently  - the global zinc market expected  to  be in surplus this year. With the traditional slack consumption  season  from  May  to  August,  it is likely that SHFE zinc prices will  drop  in  the  near  future, Chen Xiaodong, an analyst from Guang Sheng Futures, said.

Chen added that the Chinese government has started implementing stricter controls  on  bank  loans  recently, which means there will be less cash flowing into commodity markets and commodity prices may be pulled down.

Furthermore,  increasing  market  supply  will have a negative impact on SHFE zinc  prices  in  the  near future. Since late March, domestic zinc output has  started  to  increase  due  to rebounding zinc prices, which encouraged  most  zinc  smelters  and  miners  to  restart operations at previously idle facilities, Sun Fan, an analyst from CITIC Futures, said.

Analyst Zhao Kai from Jinrui Futures predicted that domestic zinc pricesmay fall to RMB 11,000/mt (USD 1,612.15) before late August.

The most-traded  2009  August  zinc  contract  on  the SHFE ended at RMB 13,090/mt (USD 1,918.45) on May 6, up 1.36 percent from the previous trading day.