Bulls Enter on Dips, LME Zinc Records a Long Lower Shadow Bearish Candle [SMM Morning Meeting Notes]

Zinc Morning Meeting Summary on March 19

Futures Market: Overnight, LME zinc opened at $2,964.5/mt. After a brief consolidation near the daily moving average at the beginning of the session, increased short positions pressured LME zinc to move downward in a stepwise manner along the daily moving average. During European trading hours, the center shifted downward to $2,925/mt. Near the night session, longs entered at low levels, driving LME zinc to rally quickly, with the center moving up to around $2,960/mt. It eventually closed flat at $2,960/mt, with trading volume increasing to 12,987 lots and open interest rising by 440 lots to 226,000 lots. Overnight, the most-traded SHFE zinc 2505 contract opened at 23,825 yuan/mt. After a brief consolidation near the daily moving average, the center shifted downward, hitting a low of 23,730 yuan/mt. Increased long positions pushed SHFE zinc above the daily moving average, reaching a high of 23,905 yuan/mt near the session's end. It ultimately closed down at 23,870 yuan/mt, a decrease of 70 yuan/mt or 0.29%. Trading volume decreased to 68,753 lots, while open interest increased by 1,568 lots to 125,000 lots.

Macro: The Israeli military launched large-scale airstrikes on Gaza, resulting in over 400 deaths. Putin agreed to a 30-day ceasefire on energy facilities between Russia and Ukraine. The US Treasury Secretary stated that reciprocal tariff rates on April 2 would depend on the country. Canada's inflation unexpectedly surged in February, cooling expectations for an interest rate cut in April. The Ministry of Foreign Affairs responded to whether Chinese and US leaders would hold talks, stating there was no information to release. Three departments announced support for the scrappage and renewal of operational trucks meeting China III and China IV vehicle emission standards. Gold prices soared, and the Shanghai Gold Exchange issued an urgent notice to strengthen market risk control.

Spot Market:

Shanghai: In the early session, market quotations were at a premium of 20 yuan/mt against the average price, with fewer quotes against the futures price. During the second trading session, ordinary domestic brands were quoted at premiums of 0~20 yuan/mt against the 2504 contract, Baiyin at a premium of 10 yuan/mt, Huize at a premium of 60 yuan/mt, and high-priced brand Shuangyan at a premium of 60 yuan/mt. The morning futures market showed a significant decline, prompting active selling by traders and increased inquiries from enterprises. Spot premiums remained firm, and downstream enterprises purchased on dips. Overall, spot transactions were moderate, though some traders reported that certain downstream buyers continued to hold a bearish outlook, leading to a cautious sentiment in the market.

Guangdong: Initially, suppliers quoted Kirin, Mengzi, Huize, Danxia, and Lan zinc at discounts of 35~15 yuan/mt. In the second session, Kirin, Mengzi, and Lan zinc were quoted at discounts of 35~15 yuan/mt against the online price. Overall, the decline in futures prices improved market transactions, with spot trades slightly recovering. Market premiums rose slightly, and downstream pricing increased as futures prices fell. Although spot transactions improved slightly, the Guangdong region experienced a contract rollover yesterday, leading to an actual decline in premiums.

Tianjin: Tianjin was quoted at a discount of around 10 yuan/mt compared to Shanghai. By midday, Xinzi was quoted at premiums of 10~30 yuan/mt against the 04 contract, Xikeng at discounts of 10~40 yuan/mt, Bailing delivered at a premium of 30 yuan/mt, and high-priced brand Zijin at premiums of 20~50 yuan/mt. Zinc prices fluctuated, with highs followed by lows, leading to a cautious stance among downstream buyers. However, just-in-time procurement and inquiries increased, with some downstream buyers maintaining a bearish outlook and focusing on inventory consumption. Active trading among traders led to a slight correction in premiums, and market transactions improved compared to the previous day.

Ningbo: Spot quotations were at a premium of 30 yuan/mt against Shanghai. In the first session, Yongchang delivered at a premium of 30 yuan/mt against the 2504 contract, Kirin at a premium of 30 yuan/mt, and Huize at a premium of 60 yuan/mt. In the second session, traders maintained the same quotations as in the first session. Fewer traders sold in Ningbo yesterday, but the futures market declined compared to the previous day, improving inquiry sentiment among enterprises. Traders raised spot premium quotations, and downstream enterprises purchased on dips, leading to improved spot transactions.

Social Inventory: On March 18, LME zinc inventory decreased by 1,350 mt to 156,875 mt, a drop of 0.85%. According to SMM, as of March 17, total zinc ingot inventory across seven regions monitored by SMM was 138,800 mt, an increase of 3,000 mt compared to March 10 and 2,900 mt compared to March 13, indicating a buildup in domestic inventory.

Zinc Price Forecast: Overnight, LME zinc recorded a long lower-shadow candlestick, with support from various moving averages below. The escalation of tensions in the Middle East weighed on LME zinc, which fluctuated downward, but a weaker US dollar limited its decline. Overnight, SHFE zinc recorded a small bullish candlestick, with resistance from the 20-day moving average above. Zinc prices fluctuated downward overnight. Supply-side increases may gradually materialize, but without significant inventory buildup, zinc prices are expected to find support at the bottom.