Strait of Hormuz Closed Again, LME Zinc Under Pressure [SMM Morning Meeting Minutes]

Futures: Overnight, LME zinc opened at $3,322/mt. At the beginning of the session, LME zinc briefly touched a high of $3,374.5/mt. After entering the European trading session, LME zinc pulled back continuously from the high, fluctuating downward throughout, and probed a low of $3,280/mt near the end of the session, ultimately closing down at $3,285/mt, down $19/mt, a decline of 0.58%. Trading volume decreased to 121,000 lots, and open interest increased by 2,221 lots to 212,000 lots. Overnight, the most-traded SHFE zinc 2605 contract opened at 23,785 yuan/mt. At the beginning of the session, bears reduced positions and SHFE zinc edged up slightly, touching an intraday high of 23,905 yuan/mt. Subsequently, bulls reduced positions and prices fluctuated and pulled back, with the contract continuing to decline during the session and probing a low of 23,710 yuan/mt. Near the close, it stabilized slightly and rebounded, ultimately closing down at 23,740 yuan/mt, down 75 yuan/mt, a decline of 0.31%. Trading volume decreased to 30,805 lots, and open interest decreased by 1,406 lots to 77,583 lots.

Macro: Iranian media: the Strait of Hormuz has been fully closed; Iranian media: if Israeli attacks on Lebanon do not stop, Iran will withdraw from the ceasefire; "US Fed mouthpiece": the ceasefire agreement makes it harder for the US Fed to decide; US Fed meeting minutes: more officials mentioned the possibility of rate hikes; US media: Trump considers partially withdrawing US troops from NATO allies; World Gold Council: gold ETFs saw record capital outflows in March; the State-owned Assets Supervision and Administration Commission of the State Council established the Overseas State-owned Assets Bureau.

Spot:

Shanghai: Yesterday, the purchase sentiment for refined zinc in the Shanghai region was 2.1, and the shipments sentiment was 2.76. Zinc prices on futures rose notably in the morning, and downstream enterprises were cautious about high prices and mostly adopted a wait-and-see approach yesterday. Inquiry and purchase willingness was low. Traders lowered spot cargo quotes to facilitate shipments. Overall spot transactions were poor, and spot trades were mainly among traders.

Guangdong: Yesterday, the purchase sentiment for refined zinc in the Guangdong region was 1.89, and the sales sentiment was 2.78. The zinc price center moved higher. Spot market trading in Guangdong was sluggish. Downstream enterprises held certain inventory levels and thus mostly adopted a wait-and-see approach. Purchase enthusiasm was low, and spot premiums continued to decline yesterday.

Tianjin: Yesterday, the purchase sentiment for refined zinc in the Tianjin region was 1.71, and the shipments sentiment was 2.51. Zinc prices rose significantly yesterday. Downstream enterprises were cautious about high prices and purchased carefully. Combined with the gradual arrival of long-term contract deliveries, downstream purchase willingness was low with fewer inquiries. Traders slightly lowered premiums to facilitate shipments, and overall market transactions were poor.

Ningbo: The Ningbo market had ample zinc ingot supply. Downstream enterprises had accumulated certain raw material inventory from earlier purchases. Yesterday, zinc prices on futures moved higher MoM, and wait-and-see sentiment among downstream enterprises resurfaced. Spot purchases yesterday remained driven by rigid demand, and overall transaction performance was poor.

Inventory: On April 8, LME zinc inventory decreased by 1,600 mt to 112,325 mt, a decline of 1.40%. According to SMM communications, as of April 7, China's inventory saw a slight inventory buildup.

Zinc price forecast: Overnight, LME zinc posted a bearish candlestick with a long upper shadow, with various moving averages below providing support. On the macro front, optimistic sentiment over the US-Iran ceasefire drove risk assets higher, and the US dollar index touched a one-month low. However, the escalation of the Israel-Lebanon conflict, the resumption of hostile actions between Iran and Israel, Iranian media reporting the full closure of the Strait of Hormuz, combined with the possibility of a US Fed rate hike, put LME zinc under pressure. Overnight, SHFE zinc posted a small bearish candlestick, with the 40/60-day moving averages above exerting pressure and the 5/20-day moving averages below providing support. Driven by the decline in LME, SHFE zinc's center shifted lower last night. On the fundamentals side, domestic supply in China is tightening but zinc ingot supply remains ample. Attention should be paid to subsequent macro marginal changes.

Data source disclaimer: Data other than publicly available information is derived from public information, market communication, and SMM's internal database models, processed by SMM for reference only and does not constitute decision-making advice.