Inventory Pressure Remained Elevated, SHFE Zinc Center Shifted Down [SMM Zinc Morning Comment]

SMM, August 13:

Overnight LME zinc opened at $3,727.5/mt, drifted lower in early trading, dipped to a low of $3,726/mt, then stopped falling and rebounded, touching a high of $3,786/mt in the night session. Gains narrowed near the close, and it eventually closed up at $3,745/mt, up $10.5/mt, or 0.28%. Trading volume fell to 10,364 lots, while open interest increased by 145 lots to 250,000 lots. Overnight LME zinc formed a small bullish candlestick with a long upper shadow. US July CPI data came in line with expectations, and core inflation remained mild, easing pressure on the US Fed to raise rates in September. However, LME zinc inventories continued to destock and capital concentration remained relatively high, with LME zinc still fluctuating at highs. LME zinc is expected to consolidate mainly at highs today.

Overnight, the most-traded SHFE zinc 2609 contract opened at 25,935 yuan/mt, its intraday high right at the open. Afterwards, bulls cut positions, and SHFE zinc declined all the way, dipping to 25,695 yuan/mt near the close. It eventually closed down at 25,720 yuan/mt, down 110 yuan/mt, or 0.43%. Trading volume fell to 53,350 lots, while open interest decreased by 2,944 lots to 111,000 lots. Overnight SHFE zinc formed a bearish candlestick with no upper shadow. Although macro sentiment improved somewhat, consumption in China remained weak and inventory pressure remained elevated, leaving SHFE zinc facing upside resistance. SHFE zinc closed lower, while ore tightness and export expectations still provided support. SHFE zinc is expected to consolidate at highs today.

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