China Zinc Concentrate TCs Seen Fall Further

[SMM Zinc Morning Comment] Overnight, the most-traded SHFE zinc 2610 contract opened higher with a gap at 26,455 yuan/mt. After opening, SHFE zinc maintained a fluctuating trend near the daily average line, during which it hit a high of 26,560 yuan/mt. In the session, bulls reduced positions and the price pulled back, dipping to 26,415 yuan/mt. Finally, it closed up at 26,430 yuan/mt, up 190 yuan/mt, or 0.72%. Trading volume decreased to 103,000 lots, and open interest increased by 8,033 lots to 170,000 lots.

[SMM Morning Meeting Summary: Bulls Continue to Push, LME Zinc Recorded an Inverted 'V' Trend] Overnight, LME zinc opened at $3,884/mt, consolidated near the daily average line at the beginning of the session, during which it dipped to $3,872/mt, entering the European trading session, bulls added positions, and LME zinc shot up to $3,949.5/mt, entering the night session, LME zinc retreated from highs, giving up most of the gains, and the price pulled back to near the daily average line, finally closing up at $3,885.5/mt, up $1/mt, up 0.03%, trading volume increased to 20,972 lots, and open interest increased by 1,640 lots to 265,000 lots......

On August 26, LME three-month zinc rose to around $3,950/mt during intraday trading, its highest level in nearly four years, moving closer to the key $4,000/mt threshold. The rally was supported by a combination of regional supply imbalances in overseas refined zinc markets, a tight nearby structure and increased fund participation. On August 25, the LME cash-to-three-month zinc backwardation stood at approximately $134/mt, while the Cash–September backwardation was around $78.50/mt, indicating continued tightness at the front of the curve. LME zinc inventories stood at approximately 95,100 mt, down 20.7% from the end of June, while warrant holdings remained highly concentrated. Around 17,000 mt of zinc has recently been delivered into LME warehouses, approximately two-thirds of which entered warehouses in Hong Kong. However, with the Chinese export arbitrage window remaining only marginally open, the additional deliveries have yet to materially ease the tight nearby structure in the London market. Fund positioning has further increased zinc prices’ sensitivity to changes in inventories and time spreads. Aggregate long positions held by investment funds in LME zinc have exceeded 110,000 lots, indicating active bullish participation. However, position concentration data have yet to show clear dominance by any single long holder. In the short term, LME zinc may continue to test the $4,000/mt level. Key factors to monitor include the SHFE/LME ratio, Chinese refined zinc exports, the pace of deliveries into LME warehouses, and changes in LME position and warrant concentration.