Zinc Prices Under Pressure as Expectations for US Fed Interest Rate Hikes Heat Up [SMM Morning Meeting Minutes]

Zinc Morning Meeting Minutes for September 24

Futures: Overnight, LME zinc opened at $3,928.0/mt. After initially touching a high of $3,939.0/mt, increased bearish positions pressured LME zinc, which drifted lower and hit a low of $3,860.5/mt before the European trading session. Entering the European session, bulls entered at lows, and LME zinc stabilized and rebounded, consolidating around $3,890/mt before closing down at $3,897.5/mt, a decrease of $14.0/mt or 0.36%. Trading volume increased to 11,410 lots, and open interest rose by 1,076 lots to 264,000 lots. Overnight, the SHFE zinc 2611 contract opened at 26,620 yuan/mt, initially dipped to a low of 26,610 yuan/mt, then increased bullish positions pushed SHFE zinc to shoot up quickly, touching a high of 26,795 yuan/mt. It then pulled back under pressure and drifted lower during the session, with the center running below the daily average line, before closing up at 26,710 yuan/mt, an increase of 195 yuan/mt or 0.74%. Trading volume decreased to 56,255 lots, and open interest increased by 1,069 lots to 146,000 lots.

Macro: The White House denied reports of a diesel export ban, calling it "fake news"; the US 5-year Treasury yield rose above 5%, the first time since 2007; the US Treasury will repurchase up to $6 billion of long-term Treasury bonds on Thursday; Iranian media reported that Araghchi's contact with Witkoff was unauthorized and requires an explanation; Xi Jinping arrived in Washington for a state visit to the US.

Spot Market:

Shanghai: Refined zinc purchasing sentiment in Shanghai was 2.04, and selling sentiment was 2.57. In the morning session, zinc prices on the futures maintained a fluctuating trend, and downstream enterprises continued purchasing as needed. Overall spot trades were average, and trader quotes in the Shanghai market were basically flat from the previous day. However, affected by rising freight costs, delivered prices of Ex-works zinc ingots have recently moved higher, driving up spot premiums for some downstream transactions.

Guangdong: Refined zinc purchasing sentiment in Guangdong was 1.88, and selling sentiment was 2.65. Yesterday, the zinc price center pulled back slightly, and downstream enterprises made some purchases in preparation for the Mid-Autumn Festival and National Day holidays. Meanwhile, arrivals in Guangdong have been limited recently, and trader quotes remained firm, with spot premiums edging up.

Tianjin: Refined zinc purchasing sentiment in Tianjin was 1.80, and selling sentiment was 2.31. Futures consolidated at highs, and downstream enterprises mostly stayed on the sidelines with few inquiries. As the holidays approached, freight costs rose, and traders raised their selling premiums, while overall market trading sentiment was weak.

Ningbo: Although zinc prices on the futures maintained a fluctuating trend, with the dual holidays approaching, downstream enterprises continued stockpiling as needed, and traders in the market continued to raise spot quotes, with spot premiums edging up.

Social inventory: On September 22, LME zinc inventory increased by 150 mt to 114,875 mt, up 0.13%. According to SMM communication, as of September 21, China's inventory increased by 2,100 mt to 215,600 mt.

Zinc price forecast: Overnight, LME zinc recorded three consecutive bearish candlesticks, with the daily candlestick center edging lower, while the middle Bollinger Band provided support below. Overnight, US Treasury yields rose across the board, and the US September PMI hit a new high in recent years, reigniting market expectations for US Fed interest rate hikes. The strong rally in the US dollar weighed on zinc prices, pushing the center slightly lower. Overnight, SHFE zinc posted a bullish candlestick with a long upper shadow, with the middle Bollinger Band providing support below and the KDJ indicator expanding upward. On the fundamentals side, the ore shortage remains unresolved, and TCs continue to linger at low levels, providing solid support from the bottom. However, rising expectations for US Fed interest rate hikes, combined with the pullback in the LME zinc 0-3 back structure, have left zinc prices encountering resistance above.

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