Uncertainty Remains in Trump's Policies, LME Zinc Maintains Fluctuating Trend [SMM Morning Meeting Summary]

Futures Market: Overnight, LME zinc opened at $2,958/mt. At the beginning of the session, LME zinc fluctuated around the daily moving average. During the European trading hours, it plunged downward, then rebounded during the night session, fluctuating around $2,930/mt. By the end of the session, LME zinc continued to decline, hitting a low of $2,906/mt and closing at $2,911/mt, down by $46/mt or 1.56%. Trading volume increased to 80,676 lots, while open interest decreased by 1,330 lots to 222,000 lots. Overnight, LME zinc recorded a large bearish candlestick, with resistance from the 40-day and 60-day moving averages above and support from the 10-day moving average below. Overnight, the most-traded SHFE zinc 2503 contract opened at 24,130 yuan/mt. Initially, it fluctuated near the daily moving average, reaching a high of 24,220 yuan/mt. Subsequently, with increased short positions, SHFE zinc fluctuated downward below the daily moving average, hitting a low of 24,060 yuan/mt and closing at 24,085 yuan/mt, down by 115 yuan/mt or 0.48%. Overnight, SHFE zinc recorded a bearish candlestick, with resistance from the 20-day and 60-day moving averages above and support from the 10-day moving average below.

Macro: On his first day in office, Trump signed over 40 presidential executive orders. TASS reported that preparations for a phone call between Putin and Trump had not yet begun. Canadian Prime Minister Trudeau expressed support for a 1-to-1 retaliatory tariff against the US. Japanese media reported that the Bank of Japan is moving toward a rate hike during this week's meeting. Central Huijin increased its holdings in broad-based ETFs in Q4 last year. The Ministry of Human Resources and Social Security announced plans to moderately increase basic pensions for retirees, with more focus on low- and middle-income groups. The Ministry of Industry and Information Technology (MIIT) is studying the establishment of the second phase of the National SME Development Fund.

Spot Market:

Shanghai: In the early session, the market quoted around the average price minus 20 yuan/mt to flat. Before the Chinese New Year break, traders continued to offload cargoes, while the futures market maintained a fluctuating trend. Downstream enterprises that have not yet closed for the holiday still held some raw material inventory from earlier purchases, resulting in low purchase willingness yesterday. Traders further lowered premiums to facilitate sales, and overall spot transactions remained sluggish.

Guangdong: Spot discounts against Shanghai were 40 yuan/mt. Overall, more downstream enterprises have entered the holiday period, leading to sluggish market transactions. Guangdong inventories increased. In the early session, traders quoted higher premiums for sales, but downstream purchase willingness remained low, prompting a reduction in premiums. Although the price spread between futures contracts widened yesterday, poor sales led to lower market premiums compared to the previous day.

Tianjin: Spot discounts in Tianjin were 50 yuan/mt against Shanghai. The futures market continued to rebound yesterday, but most downstream enterprises had already entered the Chinese New Year break, leaving almost no consumption in the Tianjin market. Many traders were focused on year-end closing, resulting in fewer market quotations. Smelters continued to lower premiums for sales, and overall transactions were poor.

Ningbo: Spot premiums against Shanghai were 20 yuan/mt. This week, traders in Ningbo gradually entered holiday mode, with some indicating that long-term contract shipments would arrive after the holiday. The market saw almost no spot quotations yesterday, as many downstream enterprises were on holiday, and there were no inquiries for purchases. The market atmosphere remained sluggish.

Social Inventory: On January 21, LME zinc inventories decreased by 4,000 mt to 195,125 mt, a decline of 2.01%. As of Monday, January 20, SMM's total zinc ingot inventory across seven regions was 59,400 mt, down by 1,600 mt from January 13 but up by 600 mt from January 16, indicating an increase in domestic inventory.

Zinc Price Outlook: Zinc prices have been fluctuating due to uncertainties surrounding Trump's policies. The reduction in overseas inventories continues to provide some support for zinc prices. As most downstream enterprises have entered the holiday period, consumption is gradually weakening. However, macroeconomic developments should still be closely monitored. Zinc prices are expected to maintain a fluctuating trend in the short term.