Macro and Fundamentals Resonated, LME Zinc Posted a Three-Day Winning Streak [SMM Morning Meeting Summary]

April 1 Zinc Morning Meeting Summary

Futures: Overnight, LME zinc opened at $3,185.5/mt. Early in the session, LME zinc fluctuated around the daily average line, dipped to $3,158/mt during European trading hours, and then, after entering the night session, increased long positions pushed LME zinc all the way up, with the center moving to around $3,220/mt. It finally closed higher at $3,214/mt, up $32/mt, or 1.01%. Trading volume increased to 13,644 lots, and open interest increased by 1,851 lots to 210,000 lots. Overnight, the most-traded SHFE zinc 2605 contract opened at 23,555 yuan/mt. After SHFE zinc dipped to 23,515 yuan/mt early in the session, increased long positions pushed SHFE zinc all the way up, and it finally closed at the intraday high of 23,695 yuan/mt, up 130 yuan/mt, or 0.55%. Trading volume decreased to 37,739 lots, and open interest decreased by 528 lots to 91,015 lots.

Macro: Reuters survey: OPEC's March production hit the lowest level since the peak of the COVID-19 pandemic; Buffett: stock market valuations still lack appeal; Iranian president: Iran is willing to end the war provided its demands are met; the U.S. military's aircraft carrier Bush is being deployed to the Middle East; Trump said the Iran war would end within two to three weeks; the notice on higher fuel surcharges for domestic air routes was withdrawn; the unified domestic and foreign currency fund management policy for overseas listings by domestic enterprises took effect on April 1; central bank: it recommended giving full play to the integrated effects of incremental policy and existing policy.

Spot Market:

Shanghai: refined zinc purchasing sentiment in Shanghai was 2.06, and shipment sentiment was 2.65. Yesterday, downstream enterprises in east China were not active in purchasing. Zinc prices on the futures market remained high, and some downstream players had sufficient raw material inventory, so they continued to wait and see yesterday, while suppliers were unwilling to make shipments at low prices. Spot premiums were basically stable from the previous day, and overall spot trades were poor.

Guangdong: refined zinc purchasing sentiment in Guangdong was 2.05, and sales sentiment was 2.73. Affected by the higher center of zinc prices, spot transactions in the Guangdong market have been sluggish recently. Traders were highly willing to make shipments, but constrained by weakening downstream demand, spot premiums struggled to rise and maintained a fluctuating trend.

Tianjin: refined zinc purchasing sentiment in Tianjin was 1.88, and shipment sentiment was 2.39. Yesterday, zinc prices continued to fluctuate at highs. Under the continued impact of environmental protection in Hebei on downstream operating rates, downstream zinc ingot inventory remained high. A small number of enterprises mainly made just-in-time procurement, market trading was dominated by traders, trader shipment premiums were basically stable with a slight increase, and overall market transactions were poor.

Ningbo: zinc prices on the futures market remained high in the morning, and quotations from Ningbo traders changed little from the previous day. Spot premiums were firm, downstream enterprises purchased according to orders, and spot transactions were mediocre.

Social Inventory: As of March 31, LME zinc inventory decreased by 775 mt to 114,500 mt, down 0.67%; according to SMM, as of March 30, inventory in China continued to decline.

Zinc Price Outlook: Overnight, LME zinc posted a three-day winning streak, with support from the 20-day moving average below and resistance from the 40/60-day moving averages above. Overnight, on expectations of a possible de-escalation in Middle East geopolitical conflicts, the US dollar index moved lower and base metals rose. Coupled with continued destocking in LME zinc inventory, the LME Cash-3M structure fluctuated around a small contango, with structural risks still present, driving zinc prices higher throughout the session. Overnight, SHFE zinc posted a bullish candlestick with no upper shadow, with support from the 5/10-day moving averages below. Driven by the overseas market overnight, zinc prices fluctuated upward. However, on the fundamentals side, production at domestic smelters in April is expected to increase by more than 10,000 mt MoM. At elevated zinc prices, procurement enthusiasm among downstream enterprises declined, inventory destocking slowed down, and weak domestic fundamentals are expected to cap further gains. Attention should be paid to peak-season consumption performance and raw material supply at smelters.

Data Source Statement: Except for public information, all other data was processed and derived by SMM for reference only, based on public information, market communication, and SMM's internal database models, and does not constitute decision-making advice.