LME Zinc Rally Paused, Stop Rising and Start to Fall [SMM Morning Meeting Minutes]

Futures: Overnight, LME zinc opened at $3,892.5/mt. Early in the session, the price center rose and touched a high of $3,933/mt, then quickly moved lower to a low of $3,840/mt. In the night session, LME zinc recouped part of its losses and rebounded to consolidate near the daily moving average, finally closing up at $3,888.5/mt, up $3/mt, or 0.08%. Trading volume fell to 19,954 lots, and open interest decreased by 3,680 lots to 261,000 lots. Overnight, the most-traded SHFE zinc 2610 contract opened at 26,285 yuan/mt. Early in the session, SHFE zinc briefly touched a high of 26,335 yuan/mt, then consolidated and pulled back to a low of 26,085 yuan/mt. After that, as bears reduced positions, prices edged higher, finally closing up at 26,195 yuan/mt, up 55 yuan/mt, or 0.21%. Trading volume fell to 88,137 lots, and open interest decreased by 995 lots to 165,000 lots.

Macro: The Trump administration was reportedly unwilling to return to the terms of the memorandum of understanding reached with Iran in June; Trump said he had a very good conversation with Putin and believed Russia would not attack NATO territory; Russia’s Foreign Ministry said the UK and France were playing with fire by providing Ukraine with sensitive missile technology and might strike UK-related military targets inside Ukraine; three senior US Fed officials struck a hawkish tone; the US was considering new semiconductor tariffs; Premier Li Qiang arrived in Gyirong, Tibet to direct emergency rescue and disaster relief efforts; China’s Foreign Ministry said China and the US remained in communication on leader-level interactions within the year; China’s Ministry of Commerce responded to the US consideration of an additional 7.5% tariff on China, calling it a typical act of unilateralism and protectionism, which China firmly opposed.

Spot:

Shanghai: Yesterday, refined zinc purchasing sentiment in Shanghai was 1.84, and shipments sentiment was 2.59. In the morning, SHFE zinc futures prices continued to rise WoW. Downstream buyers remained deterred by high prices and made almost no inquiries or purchases. The spot market atmosphere stayed sluggish, traders faced difficulty selling, and mostly quoted prices in a laid-back manner, with strong wait-and-see sentiment in the market.

Guangdong: Yesterday, refined zinc purchasing sentiment in Guangdong was 1.7, and selling sentiment was 2.48. Zinc prices continued to rise, and market trading activity decreased amid disruptions from high prices. Downstream enterprises also saw sluggish orders due to high prices. Overall, wait-and-see sentiment driven by fear of high prices was relatively strong, and spot premiums edged down.

Tianjin: Yesterday, refined zinc purchasing sentiment in Tianjin was 1.67, and shipments sentiment was 2.35. Futures continued to rally to a multi-month high. Downstream buyers made no inquiries, mainly consumed inventory, or mainly priced later. Traders were not active in selling, premiums held steady, and overall market transactions were relatively poor.

Ningbo: A typhoon was about to block its way into Zhejiang. Some downstream plants in Ningbo began suspending production and taking holidays starting today. In addition, as SHFE zinc futures prices rose again, high zinc prices suppressed downstream purchasing and demand remained sluggish; there was almost no trading in the Ningbo spot market yesterday.

Inventory: On August 27, LME zinc inventory increased by 550 mt to 97,325 mt, up 0.57%; according to SMM market communication, as of August 27, inventory in China increased by 1,600 mt to 269,900 mt.

Zinc Price Outlook: Overnight, LME zinc ended its bullish run and turned bearish, posting a small bearish candlestick, with the 10/60-day daily average moving averages below providing support. Hawkish remarks from three senior US Fed officials, coupled with fund outflows and a successive increase in inventories outside China, slowed LME zinc’s advance, which continued to consolidate at highs. Overnight, SHFE zinc posted a small bearish candlestick, with the 10/60-day daily average moving averages below providing support. Yesterday, inventory in China edged up slightly, and current inventory remained at a high level above 260,000 mt, capping prices on the upside; however, China’s monthly ore TC continued to decline, and the Chinese market saw bulls and bears intertwined. It is expected that the short-term consolidation pattern at highs will remain unchanged.

Data Source Statement: Except for publicly available information, all other data are processed by SMM based on publicly available information, market communication, and SMM’s internal database models, for reference only and not constituting decision-making advice.