Shanghai Zinc has been declining since the recent high of 19,000 yuan on April 11th, and has recently accelerated its decline. It has given us a sense of déjà vu in both time and space. In the same period of last year, Shanghai zinc price fell from 19500 yuan to 13,000 yuan. It fell from two months to early June and bottomed out, falling more than 30%. Compared with 2010, this year was fundamentally too uneventful. In particular, China's continued consumption downturn and continued tightening of macroeconomic regulation brought more pressure on the downside of zinc prices.

Goldman Sachs reported in a report to customers on April 11th that it is time for commodities to take profits and proposes to close out the previously recommended basket of commodities. Affected by this, the market generally speculated that Goldman Sachs believes that commodity prices peaked or short-term highs have been seen, causing commodity prices to continue to decline in recent days, Lun zinc also fell from 2,550 US dollars to 2,300 US dollars.

The signs that global governments will gradually withdraw loose monetary policies also affect market sentiment. There are signs of a resurgence of the European debt crisis, coupled with the geopolitical crisis, and the overall trend of the recent commodities is hardly optimistic. On April 17th, the People's Bank of China raised the deposit reserve ratio for the fourth time this year, showing that there was no sign of a deceleration in the domestic tightening policy. As a result, the Shanghai-Zinc and other metal markets continued to feel heavy pressure.

The traditional Chinese consumer season is drawing to a close, and Shanghai zinc consumption has not shown much improvement during the peak season. Both the upstream producers and the middle traders clearly feel that the consumption from the downstream market is weak. This is also the main reason why the zinc price continues to be under pressure this year at a high level. Since this year, domestic zinc prices have remained at a discounted level for most of the time, and the rate has generally remained above 300 yuan/t, and the highest price has reached around 1,000 yuan/t. The weakness of the spot market is evident.

The problem of oversupply is again highlighted. The International Lead and Zinc Research Group (ILZSG) has revised its global refined lead surplus forecast to 123,000 t in 2011, the last estimate was about 90,000 t. This year, global refined lead production will increase by 6.1% to 10.16 million tons due to a significant increase in production capacity in China, India and Mexico.

As the world's largest consumer and producer, the market conditions in China directly affect the performance of zinc prices. Affected by the shrinking of macroeconomic policies, China is facing rising costs and slower economic growth. In the future, the Chinese economy will face more uncertainties. The sharp slowdown in the automotive industry in the first quarter shows that the demand for zinc downstream industries may face downward adjustment, and the domestic zinc market will continue to be under pressure.

At present, Shanghai zinc fell sharply after the sharp decline, but the short-term weakness began to form, the main contract 1107 contract short-term pressure in the 18,200 yuan, below the support at 17,500 yuan, in the absence of effect before the formation of a breakthrough, wait and see or moderate short is a good choice.