The Expectation of Supply Reduction Has Not Been Fully Priced In; LME Zinc Center Slightly Moves Up [SMM Zinc Morning Meeting Summary]

Zinc Morning Meeting Summary on March 14

Futures Market: Overnight, LME zinc opened at $2,934/mt. After opening, LME zinc fluctuated around the daily average line, hitting a low of $2,903.5/mt during the session. During the night session, LME zinc rose rapidly, peaking at $2,966.5/mt near the close and finally closing up at $2,958.5/mt, an increase of $25.5/mt or 0.87%. Trading volume decreased to 12,444 lots, while open interest increased by 2,608 lots to 217,000 lots. Overnight, the most-traded SHFE zinc 2505 contract opened at 24,035 yuan/mt. At the beginning of the session, SHFE zinc hit a low of 23,960 yuan/mt and then fluctuated upward, peaking at 24,190 yuan/mt near the close and finally closing up at 24,135 yuan/mt, an increase of 105 yuan/mt or 0.44%. Trading volume decreased to 56,820 lots, while open interest increased by 9,502 lots to 107,000 lots.

Macro: Trump threatened to impose a 200% tariff on EU wine; Putin stated that Russia agreed to a 30-day ceasefire proposal and might discuss implementation issues with Trump; US February PPI recorded the smallest increase since July 2024; IEA lowered its forecast for global oil demand growth this year; the pilot program for integrated domestic and foreign currency cash pools for multinational corporations was expanded; the central bank announced plans to implement a moderately loose monetary policy and to cut RRR and interest rates when appropriate; the Financial Regulatory Administration accelerated the expansion and efficiency improvement of the urban real estate financing coordination mechanism; Hong Kong Stock Exchange responded to lowering the investment threshold for Hong Kong stocks.

Spot Market:

Shanghai: In the early session, market average prices were quoted with a premium of 20 yuan/mt. The futures market continued to rise. Yesterday, some traders maintained a sentiment to stand firm on quotes, and spot premiums were basically flat compared to the previous day. However, downstream buyers remained cautious due to high prices, and spot inquiries and purchases were still moderate, with overall market transactions remaining poor.

Guangdong: Spot premiums were 10 yuan/mt against Shanghai. Overall, the futures market continued to rise yesterday, but market trading sentiment was relatively weak, with most transactions driven by just-in-time procurement based on downstream orders. Fewer traders were willing to sell during the second trading session. Currently, Guangdong's social inventory is decreasing, and traders showed a relatively low willingness to sell at low premiums. Spot premiums were flat compared to the previous day.

Tianjin: Tianjin's discount was around 10 yuan/mt against Shanghai. The futures market continued to rise yesterday, but downstream buyers were cautious due to high prices, focusing on just-in-time restocking with low procurement enthusiasm. After the end of environmental protection measures, downstream orders improved slightly, but most large factories prioritized fulfilling long-term contracts. Although traders were actively selling, they still maintained a sentiment to stand firm on quotes. Overall, market transactions were poor.

Ningbo: Spot premiums were 30 yuan/mt against Shanghai. Zinc ingots continued to arrive in the Ningbo market, with overall supply remaining sufficient. The futures market continued to rise, and downstream enterprises maintained just-in-time procurement. Traders' willingness to sell was moderate, with little change in overall spot premiums and average transaction performance.

Social Inventory: On March 13, LME zinc inventory decreased by 1,050 mt to 160,325 mt, a decline of 0.65%. As of March 13, total zinc ingot inventory across seven regions monitored by SMM was 135,900 mt, an increase of 1,900 mt compared to March 6 and an increase of 100 mt compared to March 10, indicating a rise in domestic inventory.

Zinc Price Forecast: Overnight, LME zinc recorded a bullish candlestick, with support from the 5-day moving average below. The previous supply-side reduction expectations continued to exert influence, sustaining the upward trend in LME zinc, with the overall center slightly moving upward. Overnight, SHFE zinc also recorded a bullish candlestick, supported by the 5-day moving average below. Boosted by the overseas market, SHFE zinc remained at high levels during the night session. However, SMM reported that zinc ingot inventory increased by 100 mt WoW to 135,900 mt as of Thursday, and downstream demand showed no significant improvement, indicating insufficient upward momentum for SHFE zinc.