Bearish Sentiment Continues to Affect LME Zinc, Shifting the Price Center Downward [SMM Zinc Morning Meeting Summary]

Zinc Morning Meeting Summary on February 12

Futures Market: Overnight, LME zinc opened at $2,850/mt. During the morning session, LME zinc fluctuated around the daily moving average, reaching a high of $2,850.5/mt. During the afternoon session, it declined steadily, hitting a low of $2,804.5/mt during the night session. Subsequently, LME zinc rebounded above the daily moving average and closed lower at $2,827.5/mt, down by $26.5/mt or 0.93%. Trading volume increased to 9,179 lots, while open interest decreased by 1,471 lots to 226,000 lots. LME zinc recorded a bearish candlestick, with support from the 10-day moving average below. Overnight, the most-traded SHFE zinc 2503 contract opened at 23,610 yuan/mt. At the beginning of the session, SHFE zinc dipped to 23,475 yuan/mt, then fluctuated upward slowly, reaching a high of 23,645 yuan/mt near the session's end. It eventually closed lower at 23,640 yuan/mt, down by 105 yuan/mt or 0.44%. Trading volume decreased to 47,308 lots, while open interest increased by 1,292 lots to 92,832 lots. SHFE zinc recorded a bullish candlestick, with resistance from the 10-day moving average above.

Macro: Powell reiterated that there is no urgency to adjust interest rates. In response to US sanctions, Iran warned of closing oil transportation routes. The Houthi movement stated that if Israel attacks Gaza, they will retaliate against Israel. Zelensky announced that Ukraine plans to exchange some controlled territories with Russia. The EU launched a €20 billion fund to support AI super factories. Shanghai held a meeting with foreign financial institutions. Several banks lowered US dollar deposit rates.

Spot Market:

Shanghai: In the early session, the market quoted a premium of 50 yuan/mt against the 2503 contract. Recently, downstream operations have not fully resumed, and inquiries and purchases from enterprises were limited. Some traders actively lowered their spot premium quotes to facilitate sales. Although the futures market declined slightly, some downstream buyers anticipated further declines in premiums, leading to a cautious sentiment. Overall, spot transactions continued to weaken compared to the previous day.

Guangdong: Spot discounts of 10 yuan/mt against Shanghai were observed. The operating conditions of end-user enterprises under various traders varied, resulting in differing transaction conditions. Zinc prices slightly pulled back, but downstream consumption has yet to fully recover, leading to average transaction performance.

Tianjin: Spot discounts of around 10 yuan/mt against Shanghai were recorded. The futures market continued to pull back, prompting some downstream buyers to restock at lower prices, mainly for immediate needs. Transactions were primarily between traders, with dispersed quotes among them. Overall market transactions improved slightly compared to the previous day.

Ningbo: Spot premiums of 40 yuan/mt against Shanghai were quoted. Most zinc alloy plants in Ningbo are expected to resume operations after the Lantern Festival. Recently, Ningbo's spot transactions have remained sluggish, but some traders maintained a strong sentiment to stand firm on quotes. Yesterday, Ningbo's spot premiums were basically flat compared to the previous day, with trading activity still subdued.

Social Inventory: On February 12, LME zinc inventory decreased by 1,750 mt to 166,950 mt, a decline of 1.04%. As of February 10, total zinc ingot inventory across seven regions monitored by SMM stood at 118,700 mt, an increase of 48,300 mt compared to January 27 and an increase of 11,700 mt compared to February 6. Domestic inventory recorded an increase.

Zinc Price Forecast: The market remains concerned about the impact of new US tariffs, with macro sentiment continuing to be bearish. The US dollar index rose initially before declining, causing LME zinc's center to shift downward. Macro sentiment also pressured SHFE zinc's performance. Additionally, downstream enterprises have not fully resumed operations, and zinc ingot consumption remains weak. Fundamentals provide insufficient support for zinc prices, leading to a pullback in SHFE zinc's center.