Low Inventory Continues to Support LME Zinc Fluctuating at Highs [SMM Zinc Morning Meeting Summary]

Zinc Morning Meeting Summary on February 11

Futures Market: Overnight, LME zinc opened at $2,843/mt, fluctuating around the daily moving average after the opening. During midday, LME zinc quickly dropped to a low of $2,822/mt, then rebounded all the way to a high of $2,854.5/mt by the session's end, closing up at $2,854/mt, an increase of $12/mt or 0.42%. Trading volume decreased to 5,937 lots, and open interest increased by 1,080 lots to 227,000 lots. Overnight, LME zinc recorded a bullish candlestick, with support from the 5-day moving average below. Meanwhile, the most-traded SHFE zinc 2503 contract opened at 23,730 yuan/mt, fluctuating rangebound around the daily moving average after the opening. It then slightly declined to a low of 23,670 yuan/mt before rebounding above the daily moving average, reaching a high of 23,815 yuan/mt during the session, and finally closed down at 23,785 yuan/mt, a decrease of 20 yuan/mt or 0.08%. Trading volume decreased to 40,277 lots, and open interest fell by 127 lots to 92,416 lots. Overnight, SHFE zinc recorded a bullish candlestick, with support from the 10-day moving average below.

Macro: Trump denied that Vance is his presidential successor; the US special envoy on the Russia-Ukraine issue will visit Ukraine next week; Israel's Defense Minister stated that Hamas's delay in releasing hostages completely violates the ceasefire agreement; Musk seeks to bid $97.4 billion to take control of OpenAI, Altman responded; the State Council discussed measures to boost consumption; the National Immigration Administration announced a visa-free policy for ASEAN tourist groups entering Xishuangbanna, Yunnan; BYD will equip all car models, including those priced below 100,000 yuan, with advanced intelligent driving systems.

Spot Market:

Shanghai: In the early session, the market quoted a premium of 40-50 yuan/mt against the 2503 contract. Over the weekend, zinc ingots gradually arrived in the Shanghai market, and traders continued to actively sell. However, most downstream enterprises will resume operations after the Lantern Festival, leaving market demand relatively weak. Spot premiums continued to decline, with downstream enterprises purchasing only on a need basis. Spot trades were mainly conducted among traders.

Guangdong: Spot discounts of 10 yuan/mt against Shanghai were observed. Overall, Guangdong's inventory continued to increase, and downstream enterprises gradually resumed production. As a result, some traders have been restocking recently to meet downstream demand. Market transactions improved, and premiums are expected to rise further as enterprises resume production.

Tianjin: Spot discounts of around 10 yuan/mt against Shanghai were recorded. Futures prices pulled back slightly, and downstream operations were still in the gradual resumption phase, with restocking mainly driven by rigid demand. Overall consumption remained weak, and traders' quotes were scattered. Zinc arrivals in Tianjin were limited, and traders showed a firm stance on quotes, but downstream purchases were minimal. Overall premiums slightly declined, and market transactions were average.

Ningbo: Spot premiums of 30 yuan/mt against Shanghai were quoted. Over the weekend, Qilin zinc ingots gradually arrived at Ningbo ports, putting downward pressure on Ningbo spot premiums. Downstream buyers actively purchased at lower prices, while self pick-up from warehouses faced sluggish sales. Additionally, some zinc alloy plants had sufficient raw material inventory from previous purchases, leading to low buying sentiment. Overall market transactions were average.

Social Inventory: On February 8, LME zinc inventory decreased by 1,750 mt to 168,700 mt, a drop of 1.03%. As of February 10, SMM's seven-region zinc ingot inventory totaled 118,700 mt, an increase of 48,300 mt compared to January 27 and an increase of 11,700 mt compared to February 6, indicating a rise in domestic inventory.

Zinc Price Forecast: The US raised import tariffs on steel and aluminum, and the US dollar index opened higher with a gap, putting pressure on zinc prices. However, low LME inventory continues to support LME zinc, which is expected to hover at highs. On Monday, SMM zinc inventory increased by 11,700 mt to 118,700 mt, with social zinc ingot inventory continuing to rise. However, as downstream enterprises gradually resume production after the holiday, zinc ingot demand is recovering, and SHFE zinc is expected to hover at highs.