Bears reduce positions, LME zinc rebounds from lows [SMM Zinc Morning Meeting Minutes]

SMM Zinc Morning Briefing on June 18

Futures: Overnight, LME zinc opened at $3,560/mt and then fluctuated upward throughout the session, touching an early low of $3,555.5/mt and hitting a high of $3,618/mt. It then fluctuated at highs before closing up at $3,611.5/mt, up $50/mt or 1.4%. Trading volume increased to 11,957 lots, and open interest fell by 2,364 lots to 248,000 lots. Overnight, the most-traded SHFE zinc 2608 contract opened at 24,865 yuan/mt with a gap higher and then fluctuated throughout the night session, hitting an early high of 24,970 yuan/mt and touching a low of 24,850 yuan/mt near the close. It ended up at 24,890 yuan/mt, up 150 yuan/mt or 0.61%. Trading volume fell to 33,052 lots, and open interest rose by 1,428 lots to 88,145 lots.

Macro: The US Fed removed its bias toward interest rate cuts, with nine members in the dot plot expecting rate hikes this year; inventories at the largest US oil storage hub plunged to a critical low; the presidents of the US and Iran signed an electronic memorandum of understanding; Trump said that if unsatisfied with the memorandum, bombing would resume; the central bank optimized the mechanism for temporary overnight reverse repo and repo operations in the open market; new regulations for food delivery platforms were released for public comment.

Spot Market:

Shanghai: Yesterday, the purchase sentiment for refined zinc in Shanghai was 2.04, and the shipment sentiment was 2.61. In the morning, zinc futures prices edged down, and some traders held prices firm. Although some downstream enterprises made point-price purchases, most others remained bearish. Overall spot trading showed no significant improvement, and spot premiums struggled to rise.

Guangdong: Yesterday, the purchase sentiment for refined zinc in Guangdong was 1.86, and the sales sentiment was 2.5. Zinc prices continued to fluctuate at highs. Although prices pulled back slightly from the previous day, market acceptance remained low. Early quotes were high, but actual transactions were difficult. Downstream restocking ahead of the holiday was limited, and some traders slightly lowered premiums to sell.

Tianjin: Yesterday, the purchase sentiment for refined zinc in Tianjin was 1.97, and the shipment sentiment was 2.53. Zinc prices continued to fluctuate at highs, while downstream consumption was weak, with mainly restocking for rigid demand. Traders lowered premiums slightly to sell, and overall market trading was moderate.

Ningbo: Downstream alloy plants saw weak consumption in the off-season, and purchase willingness remained low yesterday. Spot transactions were mostly need-based. Some traders lowered spot quotes to sell, and market premiums edged down.

Social Inventory: On June 17, LME zinc inventory fell by 2,175 mt to 122,375 mt, down 1.75%. According to SMM, as of June 15, domestic inventory edged up slightly.

Zinc Price Prediction: Overnight, LME zinc recorded a bullish candlestick, with the lower Bollinger Band providing support. On the fundamentals side, LME zinc ingot inventory saw a slight destocking, combined with ongoing supply-side disruptions outside China, bears reduced their positions, and LME zinc rebounded from lows, with the center moving upward. Overnight, SHFE zinc recorded a bullish candlestick, with the 40-day daily average line below providing support. Driven by the LME market trend, SHFE zinc opened higher in the night session. However, considering that off-season consumption continues to drag from the fundamentals side, SHFE zinc's upside is limited in the near term, and it is expected to maintain a fluctuating trend.

Data Source Statement: All data other than publicly available information are based on public information, market communication, and rely on SMM's internal database models, processed by SMM, for reference only and do not constitute decision-making advice.