LME Zinc Inventory Surged by Nearly 80,000 mt, Zinc Prices Plunged Sharply [SMM Morning Meeting Summary]

Zinc Morning Meeting Minutes, April 17

Futures market: Overnight, LME zinc opened at $2,621.5/mt. Initially, it briefly consolidated around the daily average line before longs took profits and exited, leading to a stepwise decline. During European trading hours, it hit a low of $2,545/mt, then rebounded, with the center of gravity shifting above the daily average line by the end of the session. It closed down at $2,577.5/mt, a drop of $36.5/mt or 1.4%. Trading volume increased to 13,768 lots, while open interest decreased by 4,932 lots to 210,000 lots. Overnight, the most-traded SHFE zinc 2506 contract opened lower with a gap at 21,850 yuan/mt. Initially, it briefly dipped to a low of 21,775 yuan/mt before rebounding, with the center of gravity operating above the daily average line. It touched a high of 21,970 yuan/mt and closed down at 21,895 yuan/mt, a drop of 245 yuan/mt or 1.11%. Trading volume decreased to 83,695 lots, while open interest increased by 3,194 lots to 130,000 lots.

Macro: Powell stated that policy adjustments require more data, denying the possibility of the US Fed providing a backstop. US stocks closed sharply lower. Xi Jinping met with the Malaysian Prime Minister, stating that China-Malaysia relations are entering a "golden era" and that both countries should jointly oppose external interference. China will convene an informal meeting of the UN Security Council to condemn US bullying and the initiation of a trade war.

Spot market:

Shanghai: In the morning session, market quotations were at a premium of 20 yuan/mt against the average price, with fewer quotations against the futures market. In the second trading session, ordinary domestic brands were quoted at premiums of 180~220 yuan/mt against the 2505 contract, Honglu-v at 230 yuan/mt, Baiyin at 240 yuan/mt, Huize at 240~260 yuan/mt, and the premium brand Shuangyan at 260~300 yuan/mt. The delivery of the SHFE zinc 2504 contract was completed, and market traders were bearish on subsequent premiums, actively selling. Yesterday, Shanghai spot premiums continued to decline, and the futures market also slid in the morning. Some companies took advantage of this to fix prices and purchase, improving spot premiums for some traders.

Guangdong: Spot premiums were at 10 yuan/mt against Shanghai, with the Shanghai-Guangdong price spread maintained. In the first session, suppliers quoted premiums of 445~495 yuan/mt for Qilin, Mengzi, Feilong, and Lanzinc. In the second session, Qilin and Huize were quoted at premiums of 460~495 yuan/mt against the net price. Overall, Guangdong saw contract rollover quotations yesterday, and with the futures market declining, market purchasing enthusiasm emerged. Some traders saw improved overall sales, and downstream end-users increased low-price fixed purchases. However, some traders still held firm on quotes, with reported premiums and discounts remaining high, making sales relatively difficult under high premiums.

Tianjin: Tianjin spot premiums were around 90 yuan/mt against Shanghai. By the midday close, Xizi was quoted at 460~470 yuan/mt against the 05 contract, Xikuang delivery at 220~250 yuan/mt, Chihong 1# delivery at 240 yuan/mt against the 2505 contract, and the premium brand Zijin at 500 yuan/mt against the 05 contract. Yesterday, zinc prices declined, but downstream restocking was substantial, with some fixed purchases not yet completed. Some companies mainly restocked based on immediate needs. In the second session, zinc prices declined significantly, and some companies fixed prices at low levels. Traders actively sold, slightly lowering premiums and discounts, with overall trading being moderate.

Ningbo: Spot premiums were at 40 yuan/mt against Shanghai, with mainstream quotations in Ningbo against the 2505 contract. In the first session, Yongchang was quoted at 240 yuan/mt, Qilin at 240~250 yuan/mt, Baiyin at 240 yuan/mt, and Honglu-v at 240 yuan/mt against the 2505 contract. In the second session, some traders lowered Qilin premiums and discounts, while others maintained the same quotations as the previous session. Delivered zinc ingots continued to impact the Ningbo market. Yesterday, self pick-up premiums from Ningbo warehouses slightly decreased. Although the futures market declined in the morning, some downstream companies were still digesting previously purchased zinc ingots, while others maintained immediate needs, with overall spot trading remaining moderate.

Zinc price forecast: Overnight, LME zinc recorded a bearish candlestick with no upper shadow, suppressed by the 5/10 daily average lines. Affected by economic uncertainty and a significant increase of nearly 80,000 mt in LME zinc inventory, zinc prices fell sharply. Overnight, SHFE zinc recorded a small bullish candlestick, but the daily candlestick's center of gravity shifted downward. Overnight, SHFE zinc's center of gravity shifted downward due to large overseas deliveries, coupled with increased consumption uncertainty under tariff impacts. Shorts entered the market, and zinc prices mainly operated in the doldrums.