Market Expectations for Increased Smelter Production Cuts in May Strengthened, Zinc Price Center Shifted Upward [SMM Zinc Morning Comment]

Last Friday, LME zinc opened at $3,451.5/mt. In the early session, LME zinc fluctuated around the daily moving average. During European trading hours, bears increased their positions, pushing LME zinc down sharply to a low of $3,423/mt. Subsequently, bulls increased their positions, driving the center of LME zinc higher, reaching a high of $3,487/mt in the night session. Toward the end of the session, the center edged slightly lower to near the daily moving average, ultimately closing higher at $3,462.5/mt, up $8.5/mt or 0.25%. Trading volume increased to 10,143 lots, and open interest increased by 1,198 lots to 232,000 lots. Last Friday, LME zinc posted a small bullish candlestick, with the 5-day moving average providing support below. Last Friday, LME zinc fluctuated at highs. LME inventory continued to decline, and the LME Cash-3M structural risk persisted, providing strong support for LME zinc.

Last Friday, the most-traded SHFE zinc 2606 contract opened higher with a gap at 24,400 yuan/mt. In the early session, SHFE zinc quickly touched a high of 24,505 yuan/mt before bulls reduced their positions and exited, sending SHFE zinc lower throughout the session to a low of 24,320 yuan/mt toward the close. It ultimately closed higher at 24,330 yuan/mt, up 60 yuan/mt or 0.25%. Trading volume decreased to 59,948 lots, and open interest increased by 2,600 lots to 107,000 lots. Last Friday, SHFE zinc posted a bearish candlestick with a long upper shadow, with the upper Bollinger Bands rail forming resistance above and various moving averages providing support below. Last Friday, the upward shift in the SHFE zinc center was mainly driven by continued significant changes in macro sentiment. The market focused on fundamentals. As the SHFE/LME zinc price ratio corrected lower, the market developed expectations for zinc ingot exports. Combined with increased smelter maintenance in May, zinc prices held up well.

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