Futures Market: Last Friday, LME zinc opened at $2,879.5/mt. In early trading, LME zinc dipped to $2,868.5/mt, then fluctuated upward above the daily moving average as longs increased positions. During the night session, LME zinc's center slightly moved below the daily moving average before quickly rebounding to fluctuate around $2,940/mt, closing higher at $2,944.5/mt, up $70.5/mt or 2.45%. Trading volume increased to 47,147 lots, and open interest rose by 94 lots to 220,000 lots. Last Friday, LME zinc recorded a large bullish candlestick, with the middle Bollinger Band forming resistance above. Last Friday, the most-traded SHFE zinc 2503 contract opened at 24,275 yuan/mt. In early trading, shorts increased positions, driving SHFE zinc downward below the daily moving average to a low of 24,025 yuan/mt. However, longs increased positions, pushing SHFE zinc upward to a high of 24,360 yuan/mt, forming a "V" reversal. Subsequently, SHFE zinc's center fluctuated rangebound around 24,300 yuan/mt, closing higher at 24,305 yuan/mt, up 80 yuan/mt or 0.33%. Trading volume decreased to 121,000 lots, while open interest increased by 861 lots to 105,000 lots. Last Friday, SHFE zinc recorded a long lower shadow bullish candlestick, with the 20-day moving average forming resistance above and the 5-day moving average providing support below.
Macro: Trump stated it is "very likely" he will grant TikTok a 90-day grace period on his first day in office. Incoming officials revealed that immigration issues are a key focus in the details of Trump's planned executive orders. The Gaza ceasefire agreement will take effect at 17:15 Beijing time on the 19th, and Israel's National Security Minister has resigned. Japanese media reported that the majority of Bank of Japan committee members are expected to support a rate hike this week. U.S. Treasury Secretary Janet Yellen announced the initiation of extraordinary measures to avoid a debt default. Chinese President Xi Jinping held a phone call with U.S. President-elect Trump. The People's Bank of China and the China Securities Regulatory Commission jointly held a meeting on stock repurchase and refinancing to further leverage policy tools to stabilize the capital market. Various regions in China will begin implementing subsidies for purchasing mobile phones and other digital products starting January 20. Will Xiaomi acquire NIO? NIO's Ma Lin responded to "brokerage speculation" as "pure fabrication."
Spot Market:
Shanghai: The market quoted around the average price ±10 yuan/mt. Recently, the Shanghai-Guangdong price spread widened again, leading some Guangdong zinc ingots to flow into the East China market. Due to price disadvantages, some downstream buyers in East China showed low purchase willingness for Shanghai zinc ingots. Spot premiums in the Shanghai market continued to decline, but the futures market rose significantly compared to the previous day. Last Friday, market transactions were still mainly driven by rigid demand.
Guangdong: Spot discounts against Shanghai stood at 340 yuan/mt. Overall, traders reported that most downstream clients had already gone on holiday. Meanwhile, the futures market's center moved upward last Friday, and downstream purchasing demand was sluggish. The narrowing price spread between futures contracts, combined with poor spot sales, led to a significant decline in spot premiums.
Tianjin: Tianjin's discount against Shanghai was 60 yuan/mt. Last Friday, the futures market continued to rebound, but downstream purchase sentiment remained low as most downstream players had entered the Chinese New Year break. Although spot zinc in Tianjin was limited, traders were eager to sell, further reducing premiums. Overall transactions were poor.
Ningbo: Spot premiums against Shanghai were 50 yuan/mt. Last Friday, there were almost no spot offers in the market. Coupled with downstream players gradually entering the holiday mode, raw material demand decreased. Additionally, low-priced zinc ingots from Guangdong impacted the Ningbo market, resulting in sluggish spot trades.
Social Inventory: On January 17, LME zinc inventory decreased by 2,550 mt to 201,350 mt, a drop of 1.25%. As of January 16, total zinc ingot inventory across seven regions monitored by SMM stood at 58,800 mt, up 800 mt from January 9 but down 2,200 mt from January 13, with domestic inventory recording a decline.
Zinc Price Outlook: The pullback in the US dollar index and increased expectations of interest rate cuts slightly supported LME zinc. Trump is set to hold his inauguration ceremony today, and macro information should continue to be monitored. As the Chinese New Year approaches, domestic downstream consumption is weakening. Meanwhile, raw material inventory days at domestic smelters are increasing, and processing fees are rebounding, easing supply-side imbalances. SHFE zinc is expected to maintain a fluctuating trend in the short term, but macro developments should also be closely watched.
