LME inventory continued to decline, and LME zinc recorded a bearish candlestick [SMM Morning Meeting Minutes]

Futures market: Overnight, LME zinc opened at $3,611/mt, briefly touched an intraday high of $3,611.5/mt in early trading, then drifted lower throughout the session, hitting a low of $3,558/mt during the night session, before edging up slightly near the close to pare some losses, eventually closing down $47.5/mt at $3,567.5/mt, a decline of 1.31%. Trading volume rose to 11,890 lots, and open interest increased by 1,807 lots to 251,000 lots. Overnight, the most-traded SHFE zinc 2609 contract opened lower with a gap at 24,660 yuan/mt. In early trading, the contract consolidated near the daily average line, dipping to a low of 24,595 yuan/mt during the session. Subsequently, a reduction in bearish positions pushed the price up to an intraday high of 24,770 yuan/mt. Near the close, gains narrowed and the price consolidated, eventually closing down 60 yuan/mt at 24,720 yuan/mt, a decline of 0.24%. Trading volume shrank to 51,828 lots, and open interest decreased by 2,582 lots to 109,000 lots.

Macro: OPEC+ plans to suspend production increases after September, maintaining stable output for the rest of the year. Israeli media reported that the US and Iran may restart a memorandum of understanding. Yemen’s Houthi forces claimed to have struck a Saudi-flagged oil tanker. Iran launched missiles at a US military base in Jordan. CXMT will be included in the MSCI China All Shares Index.

Spot:

Shanghai: Yesterday, the purchasing sentiment for refined zinc in Shanghai was 2.08, and the selling sentiment was 2.63. SHFE zinc futures prices consolidated at highs, and traders' quotes were basically flat compared to the previous day. However, downstream enterprises' orders remained weak in the off-season, and spot purchases were still need-based yesterday. Overall spot trading did not improve.

Guangdong: Yesterday, the purchasing sentiment for refined zinc in Guangdong was 1.92, and the selling sentiment was 2.53. Zinc prices continued to consolidate at highs. End-use demand was relatively weak, downstream purchasing enthusiasm was low, and market transactions were mostly based on immediate needs. Spot premiums were flat compared to the previous day.

Tianjin: Yesterday, the purchasing sentiment for refined zinc in Tianjin was 1.9, and the selling sentiment was 2.51. Futures prices continued to consolidate at highs. Downstream enterprises were cautious to purchase due to high prices, mainly consuming finished product inventories, and operating rates were poor. Traders’ selling premiums were largely stable, and overall market transactions were mediocre yesterday.

Ningbo: In the morning, SHFE zinc futures prices consolidated at highs. Downstream orders in Ningbo performed poorly. Overall inquiries and purchases were light yesterday. Spot trading of zinc ingots did not improve. Traders offered quotes in a laid-back manner, and spot premiums were basically stable.

Inventory: On July 28, LME zinc inventory decreased by 1,225 mt to 102,500 mt, a decline of 1.18%. According to SMM, as of July 28, China's zinc inventory fell by 1,400 mt to 269,000 mt.

Zinc price outlook: Overnight, LME zinc formed a large bearish candlestick, with support from the 40- and 60-day moving averages below. Although zinc inventory outside China continued to decline, geopolitical uncertainty in the Middle East persisted. The US dollar index rose first and then fell yesterday, and LME zinc’s center moved lower. Overnight, SHFE zinc recorded a small bullish candlestick and found support at the lower Bollinger Band below. End-use consumption remained in the doldrums, spot market trading was sluggish, and social inventory still consolidated at highs, but the tight ore supply continued to support prices, leaving SHFE zinc consolidating at highs.

Data source statement: All data other than publicly available information are processed by SMM based on public information, market communication, and SMM's internal database models, and are for reference only and do not constitute any decision-making advice.