International Tensions Ease, LME Zinc Records a Bullish Candle [SMM Morning Meeting Summary]

SMM Zinc Morning Meeting Summary on February 24

Futures Market: Last Friday, LME zinc opened at $2,917.5/mt. In early trading, LME zinc fluctuated upward, reaching a high of $2,940/mt, but then fluctuated downward to a low of $2,881.5/mt. During European trading hours, longs increased positions, driving LME zinc to rebound from the low and rise continuously, ultimately closing down at $2,920/mt, a decrease of $3/mt or 0.10%. Trading volume decreased to 71,886 lots, and open interest increased by 2,715 lots to 230,000 lots. Last Friday, the most-traded SHFE zinc 2504 contract opened at 23,980 yuan/mt. In early trading, longs increased positions, pushing SHFE zinc to fluctuate upward above the daily moving average, with the center hovering around 24,100 yuan/mt. Subsequently, shorts increased positions, causing SHFE zinc to decline rapidly. However, longs increased positions again, enabling SHFE zinc to recover losses and reach a high of 24,160 yuan/mt. By the end of trading, it dropped back slightly and closed up at 24,130 yuan/mt, an increase of 110 yuan/mt or 0.46%. Trading volume decreased to 53,721 lots, and open interest increased by 4,241 lots to 81,772 lots.

Macro: Russia may agree to use $300 billion in frozen funds to rebuild Ukraine. The White House stated that Trump is confident in completing negotiations on the Russia-Ukraine conflict by Monday, but Zelensky denied this and strongly countered. Iraq denied reports that the US pressured Iraq to resume Kurdish oil exports. Berkshire's cash position in Q4 rose to a record high of $334.2 billion. Buffett stated in his shareholder letter that the majority of funds will always be invested in stocks. The German CDU's chancellor candidate announced the party's victory in the Bundestag election. Several senior US military officials were dismissed. The 2025 Central Document No. 1 proposed orderly advancing the pilot program for extending the second round of land contracts by another 30 years. Vice Premier Li Feng held a video call with US Treasury Secretary Janet Yellen. The State-owned Assets Supervision and Administration Commission (SASAC) deployed a special action plan to deepen the "AI+" initiative in central state-owned enterprises. The Ministry of Human Resources and Social Security responded to the issue of social security contributions for food delivery riders, stating that they are actively studying policies to lower thresholds and provide subsidies, aiming to include workers in new industries in the social security system.

Spot Market:

Shanghai: In the early session, the market quoted at discounts of 0-10 yuan/mt against the average price, with fewer quotes against the futures. In the second trading session, ordinary domestic brands were quoted at discounts of 30-20 yuan/mt against the 2503 contract, Huize was quoted at a premium of 70 yuan/mt, Baiyin at a discount of 20 yuan/mt, and the high-priced brand Shuangyan at a premium of 80 yuan/mt against the 2503 contract. Recently, the Shanghai market has fully entered the discount range. Outflows of warehouse warrants were limited, but suppliers continued to actively sell, resulting in ample market supply. Last Friday morning, the futures market continued to rise compared to the previous day, but downstream purchase willingness was low. Overall, spot purchases were average, and some suppliers slightly lowered their spot quotes.

Guangdong: Spot premiums were 20 yuan/mt higher than in Shanghai, narrowing the Shanghai-Guangdong price spread. In the first session, suppliers quoted Kirin, Mengzi, Huize, Feilong, and Lan zinc at discounts of 80-50 yuan/mt. In the second session, Kirin was quoted at discounts of 60-50 yuan/mt against the online price. Overall, the futures market rose last Friday, and downstream buyers showed resistance to high prices. The Guangdong market's overall consumption was sluggish. Downstream consumption remained in the recovery phase, and end-use demand was suppressed by high prices. Suppliers continuously lowered premiums to facilitate sales, and spot premiums continued to decline. Revitalization of downstream consumption still requires time.

Tianjin: By midday close, Xinzi was quoted at discounts of 30 yuan/mt to premiums of 10 yuan/mt against the 03 contract, Xikeng at discounts of 0-40 yuan/mt, Bailing (delivered) at premiums of 40 yuan/mt, and the high-priced brand Zijin at discounts of 10 yuan/mt to premiums of 10 yuan/mt. Last Friday, the futures market rebounded, but terminal resumption of work fell short of expectations. Although consumption showed slight improvement, downstream buyers remained cautious, with low purchase willingness and mainly restocking for immediate needs. Suppliers continued to lower premiums and discounts to facilitate sales, resulting in poor overall market transactions.

Ningbo: Spot premiums were 10 yuan/mt higher than in Shanghai, with mainstream quotes in Ningbo against the 2503 contract. In the first session, Yongchang was quoted at a discount of 10 yuan/mt, Kirin at a discount of 10 yuan/mt, and Honglu-V at parity against the 2503 contract. In the second session, supplier quotes remained unchanged from the first session. Last Friday, Ningbo market suppliers adopted a laid-back approach to sales. Spot premiums were basically flat compared to the previous day. The futures market continued to rise compared to the previous day, but spot transactions in the trade market remained sluggish. If consumption does not improve this week, Ningbo premiums and discounts are unlikely to see any improvement.

Social Inventory: On February 21, LME zinc inventory decreased by 2,675 mt to 153,600 mt, a decline of 1.71%. According to SMM, as of February 20, total zinc ingot inventory across seven regions monitored by SMM was 137,100 mt, an increase of 13,800 mt compared to February 13 and an increase of 1,500 mt compared to February 17, indicating a rise in domestic inventory.

Zinc Price Forecast: Last Friday, LME zinc recorded a bullish candlestick, with resistance at the upper Bollinger Band and support from the 10-day and 40-day moving averages. Recent easing of international tensions has slightly boosted market confidence, while overseas inventories continued to decline, supporting LME zinc's upward movement. Last Friday, SHFE zinc also recorded a bullish candlestick, with resistance at the 40-day and 60-day moving averages and support from the 10-day and 20-day moving averages. Fundamentally, domestic spot supply increased slightly, and downstream consumption is gradually returning to normal. On the macro front, market sentiment has been relatively positive recently, but downstream consumption has not fully recovered. Zinc prices are expected to remain in a fluctuating trend in the near term.