U.S. Bond Disturbance, LME Zinc Recorded a "V"-Shaped Reversal [SMM Morning Meeting Summary]

Aug 20 Zinc Morning Summary

Futures: Overnight, LME zinc opened at $3,689/mt. After a brief consolidation around the daily moving average at the start, LME zinc entered European trading, where bears added positions to push prices gradually lower. Near the night session, it dipped to an intraday low of $3,649.5/mt. Subsequently, bears exited and LME zinc surged quickly, hitting a high of $3,717/mt. It then edged lower toward the end and finally closed at $3,714/mt, up $19/mt, or 0.51%. Trading volume increased to 16,376 lots, while open interest decreased by 2,319 lots to 259,000 lots. Overnight, the SHFE zinc 2610 contract opened at 25,350 yuan/mt, initially shot up to 25,485 yuan/mt before pulling back under pressure. The price center then moved lower, dipping to 25,335 yuan/mt during the session, and eventually closed up at 25,380 yuan/mt, up 55 yuan/mt, or 0.22%. Trading volume decreased to 68,435 lots, and open interest fell by 417 lots to 139,000 lots.

Macro: Trump hinted that he might unveil major sanctions against Iran this week; Trump said he expects to meet Kim Jong-un later this year; US media: the US secretly opened a shipping lane in the Strait of Hormuz, shipping about 10 million barrels of oil per day; the US Treasury plans to double the buyback size to $4 billion; Fed minutes: Warsh pushed to reduce the number of policy meetings this year.

Spot Market:

Shanghai: Purchasing sentiment for refined zinc in Shanghai was 2.3, and selling sentiment was 2.7. Yesterday, SHFE zinc futures prices saw a sharp day-on-day decline, reaching the psychological price levels of downstream enterprises. Downstream plants began to actively price from last night. In the morning, overall spot transactions improved day on day, with traders actively offering and quoting, and spot premiums for zinc ingots broadly edged up slightly.

Guangdong: Purchasing sentiment for refined zinc in Guangdong was 1.94, and selling sentiment was 2.43. Yesterday, the zinc price center pulled back, downstream pricing increased, but actual transactions remained average. Meanwhile, recently Guangdong premiums were low, some traders were less willing to sell, and delivery brand spot circulation decreased, supporting premiums to edge up slightly.

Tianjin: Purchasing sentiment for refined zinc in Tianjin was 1.86, and selling sentiment was 2.57. Zinc prices continued to pull back, but downstream remained on the sidelines; point pricing increased slightly, but actual transactions remained limited. Traders kept selling premiums stable. Overall market transactions improved slightly from the previous day.

Ningbo: In the morning, SHFE zinc futures prices slid below 25,000 yuan/mt on a day-on-day basis, and downstream enterprises took advantage of lower prices to fix prices and purchase. Overall spot transactions improved day on day, with traders actively selling, and premiums subsequently raised.

Social Inventory: On Aug 19, LME zinc inventories increased by 8,525 mt to 95,050 mt, up 9.85%. According to SMM, as of Aug 17, domestic inventories rose by 5,700 mt to 270,000 mt.

Zinc price prediction: Overnight, LME zinc recorded a long lower shadow bullish candlestick, with support from the 20-day moving average below, and KDJ opening narrowing. Overnight, because the US Treasury Department announced that the scale of long-term Treasury buyback operations would be at least doubled, US bond yields pulled back, LME zinc responded with a "V"-shaped reversal, but the market doubted the durability of the effect, limiting the rebound of zinc prices. Overnight, SHFE zinc recorded a small bullish candlestick with a long upper shadow, with resistance from the 20-day moving average above. Overnight, influenced by expectations of improving liquidity outside China, prices rebounded slightly, but the rebound was limited by LME deliveries to warehouses and high domestic inventory levels.

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