Precious Metals Decline and Inventory Drops, LME Zinc Maintains Fluctuating Trend [SMM Morning Meeting Minutes]

Futures: Overnight, LME zinc opened at $3,324/mt, initially touching a high of $3,327.5/mt before its price center quickly dropped to $3,271.5/mt. After entering European trading hours, prices gradually fluctuated and rebounded, closing above the daily average line by the end of the session. It finally closed down at $3,298.5/mt, falling $7/mt, a decrease of 0.21%. Trading volume decreased to 80,368 lots, and open interest fell by 3,617 lots to 229,000 lots. Overnight, the most-traded SHFE zinc 2603 contract opened at 24,350 yuan/mt, initially dipping to 24,320 yuan/mt. Subsequently, bears reduced positions and exited the market, causing prices to gradually fluctuate and rebound, rising above the daily average line and touching a high of 24,615 yuan/mt. Near the end of the session, prices hovered at highs, finally closing up at 24,600 yuan/mt, an increase of 205 yuan/mt from the opening, a gain of 0.84%. Trading volume decreased to 70,510 lots, and open interest fell by 852 lots to 69,679 lots.

Macro: CME Group raised margin requirements for gold and silver futures; US planned layoffs surged in January, hitting the highest level for the month in 17 years; Zelenskyy stated the next round of Ukraine-US-Russia trilateral talks may take place in the US; The European Central Bank kept its three key interest rates unchanged; The Bank of England maintained interest rates unchanged by a one-vote margin; The World Gold Council reported global gold ETF inflows hit a record $18.7 billion in January; The Ministry of Industry and Information Technology and seven other departments issued the "Implementation Plan for High-Quality Development of the Traditional Chinese Medicine Industry (2026-2030)".

Spot:

Shanghai: Yesterday in Shanghai, the refined zinc purchasing sentiment was 1.94, and the sales sentiment was 2.48. In the morning, zinc futures prices pulled back throughout the session. Traders in the Shanghai market continued to hold prices firm, and spot premiums rose. Although some downstream buyers placed some point-price orders on the dip in the morning, new purchases were limited, and overall spot trading remained sluggish.

Guangdong: Yesterday in Guangdong, the refined zinc purchasing sentiment was 1.84, and the sales sentiment was 2.27. As the Chinese New Year holiday approaches, some traders in the market have started taking holidays along with downstream enterprises recently, resulting in relatively sluggish market activity. Social inventory in Guangdong has been gradually increasing, and spot premiums/discounts continued to decline.

Tianjin: Yesterday in Tianjin, the refined zinc purchasing sentiment was 1.81, and the sales sentiment was 2.12. Yesterday, zinc prices dropped back slightly. Most downstream enterprises were on holiday, and the price level did not meet their psychological targets; downstream players still held a bearish view, resulting in few point-price orders and sluggish trading. Traders' selling premiums were largely stable, and overall market trading was average.

Ningbo: In the morning, downstream enterprises' willingness to purchase and inquire about prices remained poor. However, as futures prices fell, some enterprises placed some point-price orders on the dip. Some traders in the market took this opportunity to raise their spot offers, leading to a narrowing of spot discounts in the market.

Inventory: On February 5, LME zinc inventory decreased by 400 mt to 107,800 mt, down 0.37%. According to SMM communication, as of Thursday, February 5, domestic zinc ingot inventory increased.

Zinc Price Forecast: LME zinc recorded a bearish candlestick overnight, with resistance from the 5-day and 10-day daily average moving averages above and support from the 40-day and 60-day daily average moving averages below. Influenced by the decline in precious metals, the price center of base metals moved downward, while the gradual decrease in overseas zinc inventory provided some support to zinc prices, and LME zinc maintained a fluctuating trend. SHFE zinc recorded a bullish candlestick overnight, with resistance from the 5-day and 20-day daily average moving averages above and support from the 40-day and 60-day daily average moving averages below. Domestic social inventory continued to build up, spot market consumption performance was average, and coupled with fading macro sentiment, the price center of SHFE zinc experienced a slight decline.

Data Source Statement: Except for publicly available information, other data are processed by SMM based on public information, market communication, and SMM's internal database model, for reference only and not intended as decision-making advice.