Middle East Geopolitical Risks Emerge Zinc Prices Expected to Fluctuate at Highs [SMM Morning Meeting Summary]

March 2 Zinc Morning Meeting Summary

Futures: Last Friday, LME zinc opened at $3,372.5/mt, fluctuating around the daily average in early trading. During European trading hours, it reached a high of $3,389.5/mt. Subsequently, as bulls took profits and exited, LME zinc fell, reaching a low of $3,305/mt by the end of the session. It closed down at $3,308/mt, a decrease of $58.5/mt or 1.74%. Trading volume increased to 10,342 lots, while open interest decreased by 3,669 lots to 226,000 lots. The most-traded SHFE zinc 2604 contract opened at 24,540 yuan/mt, briefly rising to 24,600 yuan/mt. Then, with bears adding positions, the center of SHFE zinc dropped to 24,490 yuan/mt. By the end of the session, it further declined to a low of 24,405 yuan/mt, closing down at 24,445 yuan/mt, a decrease of 265 yuan/mt or 1.07%. Trading volume decreased to 63,095 lots, while open interest increased by 4,245 lots to 99,119 lots.

Macro: Trump: Military action against Iran could last 4 weeks; US military claims to have destroyed the headquarters of Iran's Islamic Revolutionary Guard Corps; Trump: New Iranian leadership wants dialogue, I agree to negotiations; Iran launches 4 missiles at US aircraft carrier; OPEC+ confirms an increase of 206,000 bpd in April, reiterating full flexibility based on market conditions; UK says Iran launched its first missile attack on Europe; The Political Bureau of the CPC Central Committee held a meeting to discuss the draft outline of the 15th Five-Year Plan and the government work report.

Spot Market:

Shanghai: In the Shanghai area, the refined zinc purchasing sentiment was 1.88, and the selling sentiment was 2.49. Traders were actively quoting for sales, but downstream enterprises are still in the process of resuming operations, and with some inventory from previous stockpiling, downstream inquiries and purchases remained relatively small on Friday. Traders lowered spot quotes to facilitate sales, leading to a wider discount in the market.

Guangdong: In the Guangdong area, the refined zinc purchasing sentiment was 1.63, and the selling sentiment was 2.17. Overall, due to the late resumption of production by end-users, recent market transactions have been sluggish. With zinc prices fluctuating at highs, downstream purchasing enthusiasm is low, but traders' quotes have remained stable, keeping premiums and discounts steady.

Tianjin: In the Tianjin area, the refined zinc purchasing sentiment was 1.67, and the selling sentiment was 2.02. On Friday, zinc prices mainly fluctuated, with limited downstream inquiries. Large factories mainly operated on long-term contracts. Traders' selling premiums slightly stabilized, and the market was sluggish with few overall transactions.

Ningbo: The market had ample zinc ingot supply, with some traders adopting a laid-back approach to sales. There were ongoing discrepancies in quotes, but many downstream enterprises are expected to gradually resume operations next week. Spot transactions remained poor on Friday. Social inventory: On February 27, LME zinc inventory decreased by 1,050 mt to 97,350 mt, a decline of 1.07%; according to SMM communication, as of February 26, domestic inventory continued to build up.

Zinc price forecast: Last Friday, LME zinc recorded three consecutive bearish candlesticks, with the daily candlestick center moving downward. The US core PPI saw its fastest growth in a year, complicating the US Fed's monetary policy. Additionally, over the weekend, a sudden geopolitical conflict in the Middle East led to the closure of the Strait of Hormuz, causing crude oil and precious metal prices to open higher. This is expected to boost zinc prices; attention should be paid to the evolution of geopolitical risks. Last Friday, SHFE zinc also recorded a bearish candlestick, with the middle Bollinger Band providing resistance above and the 40-day moving average offering support below. Due to the social inventory buildup after the Chinese New Year and an increase of more than 10kt in smelter inventory, market transactions were mainly focused on weak realities before consumption recovered. However, the sudden geopolitical risks over the weekend provided some boost to non-ferrous metals, leading zinc prices to fluctuate at highs.

Data source statement: Apart from 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 do not constitute decision-making advice.