LME Zinc Decline Paused Temporarily, Expected to Maintain Fluctuating Trend in the Short Term [SMM Zinc Morning Meeting Minutes]

SMM Zinc Morning Meeting Minutes, May 19

Futures: Overnight, LME zinc opened at $3,531/mt. At the beginning of the session, LME zinc briefly pulled back, hitting a low of $3,495.5/mt, then rebounded from lows, reaching a high of $3,554/mt during the session. Subsequently, LME zinc fluctuated downward to near the daily average line, finally closing down at $3,515.5/mt, down $23/mt or 0.65%. Trading volume decreased to 10,662 lots, and open interest increased by 1,071 lots to 244,000 lots. Overnight, the most-traded SHFE zinc 2607 contract opened at 24,800 yuan/mt. At the beginning of the session, SHFE zinc touched a high of 24,800 yuan/mt. After the opening, SHFE zinc quickly pulled back to near the daily average line, hitting a low of 24,605 yuan/mt. Then SHFE zinc moved sideways around the daily average line, finally closing down at 24,690 yuan/mt, down 40 yuan/mt or 0.16%. Trading volume decreased to 23,997 lots, and open interest increased by 1,527 lots to 80,561 lots.

Macro: Trump said he had canceled the military strike on Iran originally scheduled for tomorrow (May 19); Warsh will be sworn in as Fed Chairman on Friday, with the ceremony presided over by Trump; the US Treasury Secretary announced another 30-day extension of the Russian seaborne oil sanctions waiver; UK Prime Minister Starmer stressed he would not resign, saying he still plans to run in the next UK general election; CSRC: push forward the deepening reform of the Beijing Stock Exchange with greater efforts; NBS: from January to April, the value-added output of industrial enterprises above designated size nationwide was up 5.6% YoY.

Spot market:

Shanghai: Yesterday, the purchasing sentiment for refined zinc in the Shanghai region was 2.1, and the shipments sentiment was 2.63. Yesterday morning, futures zinc prices edged down. At the beginning of the week, some downstream buyers purchased at spot prices, but other downstream participants mostly continued to expect lower prices. Yesterday, the spot market saw limited improvement, traders actively offered shipments, and spot premiums rose accordingly.

Guangdong: Yesterday, the purchasing sentiment for refined zinc in the Guangdong region was 1.57, and the sales sentiment was 2.4. Yesterday, the zinc price center moved lower, but futures overall remained around 24,500 yuan/mt. Combined with mediocre end-use consumption in the Guangdong region, overall market transactions remained lackluster. The Guangdong region underwent contract rollover yesterday, with the referenced contract changing from the 2606 contract to the 2607 contract, and premiums remained fluctuating at discounts.

Tianjin: Yesterday, the purchasing sentiment for refined zinc in the Tianjin region was 1.83, and the shipments sentiment was 2.43. Yesterday, zinc prices pulled back slightly, but downstream participants still had a bearish outlook. Combined with weak consumption and limited restocking, traders' shipment premiums held largely stable, and overall market transactions remained lackluster.

Ningbo: Long-term contract zinc ingots arrived over the weekend, but overall cargo volume remained limited. Spot premiums were raised. In the morning, futures zinc prices declined, but did not fall to downstream buyers' psychological price levels. Overall, spot purchases were limited, and spot trades saw limited improvement.

Social inventory: On May 15, LME zinc inventory decreased by 825 mt to 109,925 mt, a decline of 0.74%. According to SMM communication, as of May 18, China's inventory edged up.

Zinc price forecast: Overnight, LME zinc posted a bearish candlestick, with the 10-day moving average providing support below. On the macro front, the Middle East situation has not yet concluded, but the US dollar index retreated from highs, and LME zinc's downward trend paused temporarily. Combined with persistently low LME zinc ingot inventory, LME zinc is expected to maintain a fluctuating trend in the short term. Overnight, SHFE zinc posted a bearish candlestick, with the 5-day moving average forming resistance above. On Monday, SMM zinc ingot social inventory continued to accumulate, with consumption continuing to weigh on zinc price movements. However, zinc concentrate TCs continued to decline, providing some overall support for zinc prices. Amid the tug-of-war between longs and shorts, SHFE zinc maintained a fluctuating trend.

Data source disclaimer: Data other than public information is derived from public information, market communication, and SMM's internal database models, processed by SMM. It is for reference only and does not constitute decision-making advice.