US Dollar Index Strengthens, Weighing on LME Zinc Trend [[SMM Zinc Morning Meeting Summary]]

Zinc Morning Meeting Summary on May 6

Futures Market: On Wednesday last week, LME zinc opened at $2,657.5/mt. Early in the session, LME zinc reached a high of $2,660.5/mt, then fluctuated rangebound along the daily average line. However, towards the end of the session, LME zinc fell sharply, hitting a low of $2,580/mt, and eventually closed at $2,580.5/mt, down $70/mt or 2.64%. Trading volume increased to 11,538 lots, while open interest rose by 1,013 lots to 207,000 lots. On Wednesday last week, SHFE zinc trading was suspended during the Labour Day holiday.

Macro: The US ISM non-manufacturing PMI for April exceeded expectations. Trump: Tariff measures on pharmaceutical products will be announced within the next two weeks. The US rejected Japan's request for a comprehensive exemption from the 10% reciprocal tariff. Israeli Prime Minister: The new Gaza operation will involve the relocation of Gaza's population. Pan Gongsheng attended and chaired the ASEAN+3 Finance Ministers and Central Bank Governors' Meeting. The Hong Kong Monetary Authority injected an additional HKD 60.543 billion this morning, bringing the total injection over three times to HKD 116.614 billion. The state increased investment to support the long-term construction of data infrastructure. During the Labour Day holiday, sales of key retail and catering enterprises nationwide increased by 6.3% YoY.

Spot Market:

Shanghai: On the last day before the Labour Day holiday, most traders began their holidays. The overall market supply was limited, and the futures market maintained a fluctuating trend. There was less spot purchase from downstream buyers, resulting in weak overall spot trading performance.

Guangdong: It offered a premium of 40 yuan/mt against spot Shanghai zinc. Overall, on Wednesday last week, the futures market maintained a fluctuating trend, with a strong holiday atmosphere in the market. Some traders found it difficult to conclude spot transactions, leading to a decrease in trading volume. Under weak trading conditions, spot premiums and discounts declined somewhat.

Tianjin: Tianjin market quoted a premium of around 40 yuan/mt against the Shanghai market. On the last day before the holiday, the futures market mainly fluctuated. Downstream buyers had largely completed their inventory replenishment for the Labour Day holiday and were either picking up goods or waiting for new long-term contracts to arrive. Additionally, downstream buyers were generally on holiday for 2 to 3 days, resulting in low overall purchase willingness. Traders continued to lower premiums and discounts to sell, leading to a decline in premiums and generally average trading volume.

Ningbo: It offered a premium of 20 yuan/mt against spot Shanghai zinc quotes. As the Labour Day holiday approached, many traders were on holiday, resulting in very few spot quotes. Overall, premiums remained high. Downstream buyers had largely completed their inventory replenishment before the holiday, with almost no inquiries or purchases, leading to sluggish market trading.

Social Inventory: On May 2, LME zinc inventory fell by 100 mt to 173,800 mt, a decrease of 1.47%. According to SMM communications, as of April 30, the total zinc ingot inventory across seven locations tracked by SMM was 77,000 mt, down 8,800 mt from April 24 and 8,900 mt from April 28, indicating a decrease in domestic inventory.

Zinc Price Outlook: On Wednesday last week, LME zinc recorded a bearish candlestick, breaking below multiple daily average lines, with the KDJ indicator opening wider. Although the US Q1 GDP data showed contraction, the service sector data still grew, indicating that the US economy has not yet entered a full-scale recession. The US dollar index continued to strengthen, putting pressure on non-ferrous metals, and LME zinc pulled back significantly during the day. On Wednesday last week, SHFE zinc trading was suspended during the Labour Day holiday.