Zinc Prices Lack Strong Support and Are Expected to Fluctuate Downward [SMM Zinc Morning Comment]

Overnight, the White House stated that Trump did not commit to deploying ground troops to Gaza; the Bank of England sold gold at a discount due to relatively delayed deliveries; US media reported that the Pentagon is drafting plans for a full withdrawal from Syria; the US is reportedly set to announce a Ukraine peace plan next week, potentially proposing a freeze on the current frontlines; spot gold hit a new all-time high above $2,880, while gold futures broke above $2,900; the US Postal Service announced it would continue accepting inbound parcels from mainland China and Hong Kong starting February 5; US Treasury Secretary Besent stated that Trump had not called on the US Fed to lower interest rates and highlighted the 10-year Treasury yield; Trump remarked that he was not in a hurry to speak with Chinese leaders, while the Ministry of Foreign Affairs responded that what is needed now is dialogue based on equality and mutual respect; surpassing 10 billion yuan, the 2025 Chinese New Year box office for new films set a new record; China's January Caixin Services PMI stood at 51, down 1.2 percentage points from the previous month, marking the lowest level since October 2024 but still indicating expansion.

Overnight, LME zinc opened at $2,808.5/mt. At the start of the session, LME zinc briefly rose to a high of $2,825.5/mt before long positions were reduced, causing it to fall below the daily moving average and fluctuate downward, hitting a low of $2,756/mt during the night session. It then consolidated near $2,790/mt towards the end of the session and ultimately closed down at $2,790.5/mt, a decrease of $22/mt or 0.78%. Trading volume increased to 11,444 lots, while open interest decreased by 2,099 lots to 226,000 lots. Overnight, LME zinc recorded a bearish candlestick, with resistance from the 20-day moving average above and support from the 5-day moving average below. On February 5, LME zinc inventory decreased by 2,275 mt to 174,150 mt, a drop of 1.59%.

Overnight, the most-traded SHFE zinc 2503 contract opened at 23,170 yuan/mt. At the start of the session, short positions increased, causing SHFE zinc to fluctuate downward and hit a low of 23,010 yuan/mt. Later, long positions entered the market, pushing SHFE zinc's center upward to consolidate near the daily moving average. It ultimately closed down at 23,175 yuan/mt, a decrease of 85 yuan or 0.37%. Trading volume fell to 57,467 lots, while open interest increased by 4,659 lots to 103,000 lots. Overnight, SHFE zinc recorded a small bullish candlestick, with resistance from the 5-day moving average above and the KDJ indicator showing a downward opening.

Zinc Price Outlook: Mixed US data and cautious remarks from US Fed officials led to a continued decline in the US dollar index. However, market concerns persist over weakened demand due to trade issues and increased tariffs. Zinc remains in a transition phase from tightness to looseness on the mining side, while post-holiday resumption of downstream and end-user operations in China still requires time. Consumption continues to provide weak support for zinc prices. In the short term, zinc prices are expected to fluctuate downward.