Macro Environment Warms Up, Zinc Prices Rise Accordingly [SMM Morning Meeting Summary]

Zinc Morning Meeting Summary on February 21

Futures Market: Overnight, LME zinc opened at $2,876/mt. After a brief consolidation around the daily moving average in early trading, LME zinc rose steadily as bulls increased positions, with the center shifting upward to fluctuate near $2,915/mt during European trading hours, reaching a high of $2,923/mt. It eventually closed higher at $2,923/mt, up $48.5/mt or 1.69%. Trading volume decreased to 8,265 lots, while open interest increased by 3,560 lots to 227,000 lots. Overnight, the most-traded SHFE zinc 2504 contract opened at 24,170 yuan/mt. In early trading, shorts increased positions, causing SHFE zinc to move downward below the upper edge of the daily moving average, with the center shifting to 24,060 yuan/mt and a low of 24,020 yuan/mt. It eventually closed higher at 24,075 yuan/mt, up 100 yuan/mt or 0.42%. Trading volume decreased to 38,056 lots, while open interest increased by 1,886 lots to 74,466 lots.

Macro: Trump stated that lumber tariffs might be announced around April 2; US Fed's Bostic still expects two interest rate cuts this year; US Treasury Secretary Besent said there are no plans to reassess the gold reserves in sovereign wealth funds; Zelensky expressed readiness to reach agreements with the US on investment and security issues; Li Qiang emphasized the need to vigorously promote technology consumption; the People's Bank of China announced the implementation of a moderately loose monetary policy.

Spot Market:

Shanghai: In the early session, the market quoted spot premiums of 0-10 yuan/mt against the 2503 contract and discounts of 20-10 yuan/mt against the 2503 contract. During the second trading session, ordinary domestic brands were quoted at discounts of 20-10 yuan/mt against the 2503 contract, Huize at premiums of 80-90 yuan/mt against the 2503 contract, Baiyin at a discount of 10 yuan/mt against the 2503 contract, while high-priced brand Shuangyan had no quotations. Zinc ingots continued to arrive in the Shanghai market during the week, and suppliers lowered spot premium quotations to facilitate sales. Shanghai spot entered the discount range, but downstream demand for zinc ingots remained weak, and the futures market maintained a fluctuating trend in the morning. Spot transactions in the market were still poor yesterday.

Guangdong: In the first session, suppliers quoted discounts of 50-40 yuan/mt for Qilin, Mengzi, Huize, and Lantian brands. In the second session, Qilin was quoted at a discount of 40 yuan/mt against the online price. Overall, zinc prices maintained a fluctuating trend, and some downstream buyers, holding a wait-and-see attitude toward future zinc price trends, mainly engaged in just-in-time procurement to consume inventory. End-use consumption showed no significant highlights overall, and with recent high premiums, enterprises' purchase willingness was relatively small. Premiums are expected to continue fluctuating downward.

Tianjin: Tianjin's discount was around 20 yuan/mt compared to Shanghai. By midday, 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 against the 03 contract, Bailin (delivered) at premiums of 40 yuan/mt, and high-priced brand Zijin at discounts of 10 yuan/mt to parity against the 03 contract. The futures market remained rangebound yesterday, with low downstream purchase willingness and just-in-time restocking as the main activity. Tianjin's social inventory accumulated, and suppliers continued to lower premiums and discounts to facilitate sales. Overall market transactions were poor.

Ningbo: Spot premiums were quoted at 10 yuan/mt over Shanghai spot prices, with mainstream quotations in Ningbo against the 2503 contract. In the first session, Yongchang was quoted at parity against the 2503 contract, Qilin at discounts of -10 to 0 yuan/mt, and Honglu-V at premiums of 10 yuan/mt against the 2503 contract. In the second session, traders' quotations remained unchanged from the previous session. Qilin zinc ingots continued to arrive in the Ningbo market, but downstream enterprises' order recovery was relatively slow. Under purchasing as needed, purchase willingness for zinc ingots was moderate, leading to a continued decline in Ningbo spot premiums. Spot transactions were also relatively weak.

Social Inventory: On February 20, LME zinc inventory increased by 725 mt to 156,275 mt, up 0.47%. According to SMM, as of February 20, total zinc ingot inventory across seven regions monitored by SMM reached 137,100 mt, an increase of 13,800 mt from February 13 and 1,500 mt from February 17, indicating a rise in domestic inventory.

Zinc Price Forecast: Overnight, LME zinc recorded a bullish candlestick, with support from the 40-day moving average below. The US dollar index fell sharply overnight, coupled with easing international disputes, leading to a broad rise in base metals, with LME zinc following the upward trend. Overnight, SHFE zinc recorded a bearish candlestick, with support from the 5-day moving average below. SMM social inventory increased to 137,100 mt, and rising TC is expected to gradually transmit to the smelting end, strengthening supply increase expectations, which may limit its upward momentum.