Renewed Uncertainty Over Tariffs Halts Rally in LME Zinc [SMM Zinc Morning Meeting Summary]

Zinc Morning Meeting Summary on June 4

Futures Market: Overnight, LME zinc opened at $2,692/mt. After opening, LME zinc trended downward, reaching a low of $2,658/mt before rebounding and rising, hitting a high of $2,711.5/mt near the close. It eventually closed up at $2,711.5/mt, gaining $18.5/mt or 0.69%. Trading volume decreased to 11,422 lots, and open interest fell by 64 lots to 213,000 lots. Overnight, the most-traded SHFE zinc 2507 contract opened at 22,260 yuan/mt. Early in the session, SHFE zinc dipped to 22,260 yuan/mt, then fluctuated upward to hit a high of 22,435 yuan/mt. Subsequently, SHFE zinc pulled back from highs near the daily average line, maintaining a narrow rangebound fluctuation. It eventually closed up at 22,355 yuan/mt, gaining 175 yuan/mt or 0.79%. Trading volume decreased to 88,953 lots, and open interest fell by 1,589 lots to 121,000 lots.

Macro: Trump's 50% steel and aluminum tariffs took effect today; the US Bureau of Labor Statistics will revise the April employment report on Non-Farm Payrolls day; US Fed's Bostic still believes there will be one interest rate cut this year; reports suggest the latest US proposal for the Iran nuclear deal would temporarily allow Iran to continue uranium enrichment activities; the Caixin China General Manufacturing PMI for May was 48.3; the White House said Chinese and US leaders will hold talks this week, with the Foreign Ministry responding; the Ministry of Commerce responded to the EU's plan to restrict Chinese companies from participating in public procurement of medical devices; domestic fuel prices increased, costing an additional 2.5 yuan to fill a tank of gas.

Spot Market:

Shanghai: On the first trading day after the holiday, zinc ingot supply in the Shanghai market was limited. Traders' spot quotations rose again above the average price, but downstream enterprises had poor order volumes, with low purchase willingness and inquiries, resulting in poor spot transaction performance. Market transactions were still mainly among traders.

Guangdong: It was at a spot discount of 130 yuan/mt against Shanghai spot. Overall, arrivals in Guangdong increased during the holiday, and spot premiums struggled to rise. The futures market trended downward yesterday, but downstream enterprises still focused on restocking based on immediate needs, with generally muted trading sentiment. Meanwhile, the price spread between futures contracts rose yesterday, and spot premiums remained flat.

Tianjin: It was quoted at a discount of 30 yuan/mt against the SHFE market. The futures market fluctuated yesterday, with poor downstream consumption and weak restocking demand, mainly driven by immediate needs. Traders continued to lower their offers, with trading mainly among traders, resulting in generally poor overall market transactions.

Ningbo: It was quoted at a spot premium of 80 yuan/mt against Shanghai spot. Zinc ingots from Huize and Qilin arrived successively, increasing supply in the Ningbo market. However, downstream enterprises had built up certain inventories earlier and continued to expect a decline in subsequent spot premiums, maintaining restocking based on immediate needs. Overall, spot transaction performance was average.

Social Inventory: LME zinc inventory fell by 800 mt to 137,350 mt on June 3, a decrease of 0.58%. According to SMM communications, as of June 3, the total zinc ingot inventory across seven locations tracked by SMM was 77,400 mt, a decrease of 1,400 mt from May 26 and an increase of 2,400 mt from May 29, indicating a rise in domestic inventory.

Zinc Price Forecast: Overnight, LME zinc recorded a bullish candlestick with a long lower shadow, with the 40-day moving average providing support below. Uncertainty over tariffs resurfaced, and the US dollar index strengthened from a low level, suppressing the zinc price trend. However, with LME continuing destocking, LME zinc rebounded during the session supported by low inventory. Overnight, SHFE zinc recorded a bullish candlestick with a long upper shadow, with the 60-day moving average providing support below. Driven by the LME market, zinc prices rose somewhat during the night session. However, with refined zinc production in June expected to increase significantly MoM, the zinc price increase was limited under supply-side pressure, basically maintaining a fluctuating trend.