Fundamental support was insufficient, and SHFE zinc pulled back significantly from highs during the night session [SMM Zinc Morning Comment]

SMM, August 4:

Overnight, LME zinc opened at $3,645.5/mt. After opening, LME zinc first fell then rose, touching a high of $3,703.5/mt during the session, before retreating from the high. Near the end of the session, LME zinc dipped to a low of $3,618/mt, and finally closed down at $3,634/mt, down $6/mt, or 0.16%. Trading volume increased by 4,655 lots to 18,193 lots, while open interest fell by 710 lots to 245,000 lots. Overnight, LME zinc formed a bearish candlestick, with the 5-day moving average below providing support. LME zinc ingot inventories remained low, and market supply concerns persisted. Bulls continued to push up zinc prices, sending LME zinc to a nearly four-year high. However, overall overseas demand showed no significant improvement, and overall fundamentals provided insufficient support. Bulls took profits and exited, and subsequently LME zinc pulled back sharply from the high.

Overnight, the most-traded SHFE zinc 2609 contract opened at 25,250 yuan/mt. It rose to a high of 25,250 yuan/mt at the open, then quickly consolidated and pulled back, dipping to a low of 24,780 yuan/mt during the session. Later, it rebounded slightly from the low, but finally closed down at 24,920 yuan/mt, down 460 yuan/mt, or 1.81%. Trading volume increased to 125,000 lots, while open interest fell by 8,609 lots to 118,000 lots. Overnight, SHFE zinc formed a bearish candlestick, breaking below multiple moving averages. On the fundamentals side, domestic zinc ingot consumption remained weak during the off-season. SMM zinc ingot inventories continued to build on Monday, with the consumption side continuing to weigh on zinc prices. Moreover, with some smelters resuming production after maintenance in August, domestic refined zinc production is expected to rebound MoM. Coupled with the impact of a sharp decline in the LME market, SHFE zinc fell significantly in the night session and is expected to maintain a fluctuating trend in the short term.

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