Bears cut production and exit, LME zinc records a bullish candlestick [SMM Morning Meeting Summary]

Zinc Morning Meeting Minutes for October 19

Futures: Last Friday, LME zinc opened at $3,669/mt. In early trading, LME zinc edged down to hit an intraday low of $3,665/mt. Subsequently, bulls entered the market, pushing prices to drift higher. Approaching the European trading session, prices touched a high of $3,720.0/mt before consolidating around the daily average line. During the night session, pressured by overhead moving averages and profit-taking, LME zinc pulled back in a choppy fashion, giving back some gains near the close. It ultimately settled up at $3,682.0/mt, up $8.5/mt, or 0.23%. Trading volume decreased by 3,820 lots to 12,159 lots, and open interest decreased by 282 lots to 264,000 lots. Last Friday, the most-traded SHFE zinc 2612 contract opened at 25,530 yuan/mt. In early trading, SHFE zinc quickly dipped to hit an intraday low of 25,420 yuan/mt. Subsequently, short covering drove SHFE zinc sharply higher, touching a high of 25,680 yuan/mt. Bullish momentum then weakened, and SHFE zinc pulled back in a choppy fashion, with its center shifting below the daily average line. It ultimately settled up at 25,555 yuan/mt, up 115 yuan/mt, or 0.45%. Trading volume decreased by 47,151 lots to 41,605 lots, and open interest decreased by 2,043 lots to 103,000 lots.

Macro: Protests erupted in multiple European countries, with over 2,000 arrests in France. Fed Chairman Warsh declined to reveal clues about future interest rate decisions. Trump exempted multiple sanctions on Russia, and Zelensky said he is forcing Ukraine to surrender. Iran's foreign minister said the plan to "reopen the Strait of Hormuz within 7 days" is still on the negotiating table.

Spot Market:

Shanghai: The refined zinc purchase sentiment in Shanghai was 2.06, and the selling sentiment was 2.55. In the morning session, zinc prices rebounded from lows. Downstream inquiries and purchase willingness weakened. In addition, as there had been considerable dip-buying earlier and plants held raw material inventory, spot purchases last Friday were largely need-based. Trader quotes in the market were basically stable from the previous day.

Guangdong: The refined zinc purchase sentiment in Guangdong was 2.1, and the selling sentiment was 2.62. Overall, Guangdong saw contract rollover last Friday, and spot premiums moved higher. Traders were relatively active in selling, and downstream dip-buying provided support to spot trades. However, some downstream players had already priced earlier, so their purchasing enthusiasm pulled back.

Tianjin: The refined zinc purchase sentiment in Tianjin was 2.02, and the selling sentiment was 2.39. Futures continued to pull back, but downstream players had purchased heavily earlier. Last Friday, purchasing sentiment was moderate, mainly through pricing. Trader selling premiums held stable, and overall spot trades were moderate.

Ningbo: In the morning session, zinc prices rebounded. Trader spot quotes in the market were basically stable from the previous day. Downstream enterprises had inventory from earlier purchases, so last Friday they purchased on a need basis. Spot trades were moderate.

Social inventory: On October 15, LME zinc inventory increased by 7,225 mt to 151,050 mt, up 4.78%. According to SMM communication, as of September 21, China's inventory fell by 4,400 mt to 202,100 mt.

Zinc price forecast: Last Friday, LME zinc recorded a small bullish candlestick with a long upper shadow, with multiple moving averages above forming resistance and the lower Bollinger Band below providing support. Last Friday, as the Fed Chairman declined to provide a rate hike path, expectations for an October rate hike declined, the US dollar weakened, and LME zinc closed higher. Last Friday, SHFE zinc recorded a small bullish candlestick with a long upper shadow, with the daily candlestick center edging up slightly and the KDJ gap narrowing. As zinc prices previously fell to around 25,200 yuan/mt, downstream purchasing sentiment improved, and social inventory destocking occurred. Destocking is expected to continue this week, with the zinc price center edging up slightly.

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 and do not constitute decision-making advice.