The Logic of Tight Supply Weakens, SHFE Zinc Records Three Consecutive Declines [SMM Morning Meeting Summary]

SMM Internal Zinc Morning Meeting Summary on December 18

Spot Fundamentals 

Shanghai: In the early session, the market quoted spot premiums of 100-120 yuan/mt over the average price, with almost no follow-up quotations. In the second trading session, ordinary domestic zinc ingots were quoted at premiums of 470-490 yuan/mt against the 2501 contract, while high-end brand Shuangyan had no quotations against the 2501 contract. SMC/KZ were quoted at premiums of 450-500 yuan/mt against the 2501 contract. Imported zinc ingots arrived in the Shanghai market, but domestic zinc ingots remained tight, supporting high spot premiums in Shanghai. Futures prices pulled back compared to the previous day, with limited improvement in downstream inquiries and purchases. Attention should be paid to the subsequent arrival of imported zinc ingots.

Guangdong: In the first session, suppliers quoted premiums of 565-605 yuan/mt for Qilin, Danxia, and Lan zinc brands. Futures prices slightly pulled back but remained at high levels, while market circulation was limited, and downstream just-in-time procurement dominated. In the second session, fewer traders offered goods, with Qilin quoted at premiums of 590-595 yuan/mt over the online price. Overall, Guangdong experienced a contract rollover yesterday, with premiums rising. Despite a slight pullback in futures prices, they remained high, and downstream just-in-time restocking occurred.

Tianjin: By midday close, Xinzi was quoted at premiums of 450-530 yuan/mt against the 01 contract, Chihong at 500 yuan/mt, Xikeng at 410-450 yuan/mt, and Bailin had no quotations. High-end brand Zijin was quoted at premiums of around 550 yuan/mt against the 12 contract. Futures prices pulled back yesterday, but with tight market sentiment, downstream purchases increased, and premiums remained firm. Overall market transactions improved.

Ningbo: In the first session, Yongchang was quoted at premiums of 450 yuan/mt against the 2501 contract, and SMC/KZ were quoted at delivered premiums of 450 yuan/mt against the 2501 contract. In the second session, traders' quotations remained unchanged from the previous session. Yesterday, there were almost no quotations for domestic zinc ingots, but imported zinc ingots flowed into the Ningbo market, exerting downward pressure on domestic transactions. Coupled with a slight pullback in futures prices, some downstream enterprises purchased imported zinc ingots for just-in-time restocking.

Zinc Price Forecast Today: Overnight, LME zinc recorded a bearish candlestick, with resistance from the 40-day moving average above and support from the 5-day moving average below. LME inventory decreased by 4,400 mt to 262,100 mt, down 1.65%, continuing its decline. US retail data outperformed expectations overnight, strengthening the US dollar and pressuring zinc prices. Additionally, the ratio of cancelled warrants on the LME slightly pulled back from high levels, and short positions increased, causing LME zinc's center to dip slightly. Attention should be paid to today's US Fed monetary policy meeting decision. Overnight, SHFE zinc recorded three consecutive bearish candlesticks, with resistance from the 5-day and 10-day moving averages above and the KDJ indicator expanding downward. As supply-side constraints ease, the tight supply-driven logic is weakening. However, demand remains better-than-expected in the off-season, inventory is at a seasonal low, and spot premiums are fluctuating at highs. Zinc prices are expected to have limited downside room.