Funds' Favour Declines, Zinc Prices Fluctuate Downward [SMM Morning Meeting Summary]

January 15 Zinc Morning Meeting Summary

Futures Market: Overnight, LME zinc opened at $2,869.5/mt. After consolidating around the daily moving average in early trading, its center shifted downward to a low of $2,845.5/mt. During European trading hours, the center moved up to $2,880/mt, reaching a high of $2,888/mt during the night session. By the end of the session, the center pulled back, closing down at $2,868.5/mt, a decrease of $7.5/mt or 0.26%. Trading volume increased to 11,145 lots, while open interest decreased by 1,792 lots to 217,000 lots. Overnight, LME zinc recorded a doji candlestick, with support from the 5-day moving average below and resistance from the 10-day moving average above. Overnight, the most-traded SHFE zinc 2502 contract opened at 24,155 yuan/mt. After a tug-of-war between longs and shorts in early trading, the bulls gained the upper hand, pushing the price to a high of 24,255 yuan/mt. Subsequently, with increased short positions, the center of SHFE zinc shifted downward, closing down at 24,155 yuan/mt, a decrease of 15 yuan/mt or 0.06%. Trading volume decreased to 51,711 lots, while open interest fell by 998 lots to 94,145 lots. Overnight, SHFE zinc recorded a bearish candlestick, with resistance from various moving averages above.

Macro: US December producer price growth was lower than expected, indicating that inflation remains on a downward trend. The Gaza ceasefire is "closer than ever," with all parties indicating that negotiations are in the final stages. Trump announced plans to establish a "Foreign Tax Agency" to impose tariffs, claiming reliance on the IRS has been "too long." Over 700,000 US "TikTok refugees" flooded Xiaohongshu within two days.

Spot Market:

Shanghai: Spot premiums were quoted at around 80–100 yuan/mt over the average price. As year-end approaches, Shanghai market traders continued to actively sell, coupled with downstream enterprises in east China gradually entering the holiday period this week. Traders successively lowered spot premium quotes in Shanghai, but purchasing willingness from enterprises significantly declined yesterday. Spot market transactions weakened MoM, and premiums are expected to continue falling. Guangdong: Spot premiums were quoted at 80 yuan/mt over Shanghai. Overall, downstream enterprises in Guangdong are gradually entering the holiday period, leading to a significant decline in downstream consumption. To facilitate sales, enterprises lowered premiums. Although the price spread between futures contracts slightly expanded yesterday, market transactions were sluggish. With poor sales, traders reduced premiums, and spot premiums declined. Tianjin: Tianjin spot prices were at a discount of 80 yuan/mt against Shanghai. Futures prices pulled back, and with many downstream enterprises on holiday, demand fell significantly. Additionally, previous restocking was substantial, leading to low purchasing enthusiasm. As delivery approaches, traders were eager to sell and actively lowered premiums, resulting in weaker overall transactions compared to the previous day. Ningbo: Spot premiums were quoted at 80 yuan/mt over Shanghai. Futures prices fluctuated, and traders continued to lower spot premiums to facilitate sales. However, downstream manufacturers in Ningbo are about to go on holiday, leading to a significant decline in raw material purchasing demand. Inquiry sentiment was low yesterday, and market transactions were poor.

Social Inventory: On January 14, LME zinc inventory decreased by 1,150 mt to 209,475 mt, a drop of 0.55%. As of January 13, SMM's seven-region zinc ingot inventory totaled 61,000 mt, down 700 mt from January 6 but up 3,000 mt from January 9, indicating an increase in domestic inventory.

Zinc Price Forecast: Overnight, PPI data unexpectedly fell short of expectations, and the US dollar index declined. However, most commodities have entered the holiday period, with prices primarily fluctuating downward. As downstream sectors gradually enter the holiday period and processing fees continue to rebound, zinc prices are expected to remain range-bound at low levels.