Zinc Price "Year-End Hurdle": Pre-Holiday Hedging and Post-Holiday Pace Management Suggestions [SMM Analysis]

SMM News on February 10th：

With the 2026 Chinese New Year approaching and the last trading week before the holiday, SMM has summarized several key points to focus on in the zinc market before and after the holiday: exchange rules and holiday arrangements, overseas supply and demand and macro factors, inventory buildup pressure, capital and liquidity, overseas supply and demand and macro factors, and the pace of post-holiday resumption of work.

1. Exchange Rules and Holiday Arrangements:
SHFE Chinese New Year holiday schedule: No night session on Friday, February 13; market closed from February 14–23; normal trading resumes on Tuesday, February 24.
Contract parameters (effective from the closing settlement on February 9): Zinc futures price limit 10%; hedging margin 11%; general margin 12%.
Trading recommendations: Reduce positions and leverage before the holiday, ensure sufficient margin; prioritize hedging and hedging strategies.

2. Overseas Supply-Demand and Macro Linkage Risks:
Overseas supply: Against the backdrop of the European rainy season, disruptions in mine production and transportation have increased, such as recent sudden floods in mines in Australia and Portugal; high European natural gas prices, smelting costs, and production constraints require attention to sudden disruptions.
Price ratio and imports/exports: The SHFE/LME zinc price ratio fluctuates around 7.4, with both imports and exports currently closed. If overseas disruptions increase, the ratio may further adjust, potentially improving the export window.
Macro factors: Geopolitics, US dollar exchange rates, and energy prices remain key variables for prices.

3. Domestic Inventory and Supply-Demand:
Inventory buildup expectations: Domestic downstream production halts for the holiday vs. smelters largely operating continuously. February inventory may increase by over 120,000 mt, putting pressure on zinc prices.
Supply side: Mine shortages have marginally eased, with TC stabilizing; smelting production in February is higher than historical levels due to by-product profit support; import window remains closed, limiting supply flexibility.
Demand side: Downstream operations are largely halted, with most end-users stockpiling modestly at low prices; terminal infrastructure performance is moderate, while automotive and home appliances show double-digit YoY declines, and the real estate sector remains weak, confirming the off-season for consumption.

4. Liquidity and Sentiment Fluctuations:
Liquidity: The increase in margin requirements, coupled with risk control measures before the Chinese New Year, prompted some funds to exit, leading to a tightening of liquidity.
Sentiment Fluctuations: Increased macro instability, high enthusiasm for precious metals, and sentiment spillover may amplify price fluctuations.
Trading Advice: Control positions, strictly set stop losses, and avoid slippage risks due to insufficient liquidity.

5. Key Focus Points After the Holiday:
Pace of Resumption: The progress of production resumptions in galvanizing, die-casting, and other processing industries will directly impact demand recovery and inventory reduction.
Raw Materials and TC: The domestic ore production recovery, the actual arrival status of imported ores, the rebound in processing fees, and the production resumption and profit performance of smelters that underwent maintenance during the Chinese New Year.
Overseas Inventories and Structure: Before the holiday, overseas LME inventories remained around 10kt, with LME Cash-3M maintaining a small contango structure. Be cautious of wild swings in LME inventories and the increased trading risks from changes in the LME Cash-3M structure.
Policy and Macro: Overseas central bank monetary policy trends, economic data performance across countries, US Fed movements, geopolitical risk changes, and domestic consumption stimulus policies.
Core Strategy: Prioritize risk management before the holiday, reduce leverage, lower positions, and ensure sufficient margin (light position over the holiday). Closely monitor inventories and overseas developments during the holiday. Post-holiday, focus on macro changes, the intensity of production resumptions, and inventory reduction, adjusting long and short positions accordingly.

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