Dragged Down by the Overseas Market, the Center of SHFE Zinc Moves Lower [SMM Morning Meeting Notes]

Spot Fundamentals

Shanghai: In the early session, the market quoted spot premiums of 100-120 yuan/mt over the average price, with few follow-up quotations. In the second trading session, ordinary domestic brands were quoted at premiums of 480-500 yuan/mt against the SHFE 2501 contract, while high-end brand Shuangyan had no quotations against the 2501 contract. Over the weekend, arrivals in the Shanghai area remained limited, and the tight supply in the market persisted yesterday. The futures market stayed at high levels, and downstream buyers restocked on a just-in-time basis. Spot premiums remained stable, and attention continues to focus on arrivals in the Shanghai market.

Guangdong: In the first session, suppliers quoted premiums of 385-405 yuan/mt for Qilin, Mengzi, Danxia, and Lanyan brands. Although the futures market showed some downward movement, it remained at high levels overall, with many market participants adopting a wait-and-see approach due to lingering concerns over high prices. In the second session, Qilin was quoted at a premium of 405 yuan/mt over the online price. Overall, traders gradually transferred their spot cargoes to delivery warehouses, leaving limited spot availability. Few traders were offering goods, and as the contract rollover approached, market transactions were moderate.

Tianjin: By midday close, Xinzi was quoted at premiums of 450-510 yuan/mt against the SHFE 01 contract, while Chihong, Xikang, and Bailing had no quotations against the 01 contract. High-end brand Zijin was quoted at premiums of 500-520 yuan/mt against the SHFE 12 contract. Yesterday, the futures market fluctuated at high levels, and downstream buyers were cautious about high prices, leading to limited procurement. However, market supply remained tight, and traders maintained firm offers, resulting in moderate overall market transactions.

Ningbo: In the first session, Yongchang was quoted at a premium of 500 yuan/mt against the SHFE 2501 contract, while Qilin was quoted at premiums of 450-500 yuan/mt against the same contract. In the second session, traders' quotations remained unchanged from the previous session. Some traders received arrivals, but the volumes were limited, and the tight supply of zinc ingots persisted. This continued to support relatively high spot premiums. The futures market performed strongly yesterday, but downstream enterprises showed weak buying sentiment, with most spot transactions still driven by just-in-time restocking by downstream enterprises.

Inventory: According to the SMM survey, as of December 16, total zinc ingot inventory across seven regions tracked by SMM stood at 89,400 mt, down 2,900 mt from December 9 and 2,000 mt from December 12, indicating a decline in domestic inventory. Inventory in the Shanghai area increased, mainly due to the arrival of imported zinc ingots over the weekend and just-in-time procurement by downstream buyers, resulting in a slight overall inventory increase. Inventory in Tianjin decreased due to transportation issues, which continued to limit arrivals at Tianjin warehouses, leading to a further decline in zinc ingot inventory. Inventory in Guangdong increased as warehouse arrivals rose ahead of the delivery weekend, boosting warehouse inventory. Overall, the combined inventory of the three regions decreased by 500 mt, while the total inventory across seven regions fell by 2,000 mt.

Zinc Price Forecast for Today: Overnight, LME zinc recorded a bearish candlestick, with its daily candlestick center shifting downward. The 5-day moving average provided support below. LME inventory decreased by 2,000 mt to 266,500 mt, a drop of 0.74%, marking a decline in LME inventory. Overnight, the US December S&P Global Manufacturing PMI preliminary reading came in at 48.3, lower than expected and hitting a three-month low, causing LME zinc to fluctuate downward. SHFE zinc recorded a bearish candlestick with no lower shadow overnight, facing resistance from the 5-day moving average above and support from the 20-day moving average below. Dragged down by the overseas market, SHFE zinc's center shifted downward overnight. However, fundamentals side, SMM zinc inventory continued to decrease by 2,000 mt to 89,400 mt, with ongoing inventory reductions limiting the downside space for zinc prices.