Futures Market: Last Friday, LME zinc opened at $2,850/mt. In early trading, LME zinc fluctuated upward above the daily moving average, reaching a high of $2,895/mt. Subsequently, with increased short positions, LME zinc fluctuated downward below the daily moving average, forming an inverted "V" pattern and hitting a low of $2,822.5/mt by the session's end. It closed down at $2,823.5/mt, a decrease of $21/mt or 0.74%. Trading volume decreased to 73,040 lots, while open interest increased by 1,642 lots to 219,000 lots. Last Friday, LME zinc recorded a long upper shadow bearish candlestick, with resistance from the 20- and 60-day moving averages above and support from the lower Bollinger Band below. On the same day, SHFE zinc opened at 23,900 yuan/mt, briefly reaching a high after the opening. With increased short positions, SHFE zinc fluctuated downward below the daily moving average, hitting a low of 23,530 yuan/mt by the session's end. It closed down at 23,530 yuan/mt, a decrease of 345 yuan/mt or 1.45%. Trading volume decreased to 60,670 lots, while open interest increased by 4,344 lots to 98,450 lots. SHFE zinc recorded a bearish candlestick, with resistance from the 10- and 20-day moving averages above and support from the middle Bollinger Band below.
Macro: Ukrainian President stated that US military aid to Ukraine has not stopped; Putin expressed willingness to discuss the Russia-Ukraine conflict and energy issues with Trump; the White House announced that the Lebanon-Israel ceasefire agreement will remain effective until February 18, 2025; foreign media reported that Houthi forces are considering banning US ships from passing through the Bab-el-Mandeb Strait as "retaliation"; the Bank of Japan raised interest rates to the highest level in 17 years; the central bank conducted 200 billion yuan of 1-year MLF operations; the first month of the new real estate tax policy implementation resulted in an additional tax reduction of 11.69 billion yuan; DeepSeek became the second-ranked free app on Apple's App Store in China.
Spot Market:
Shanghai: The market quoted on par with the 2502 contract. Last Friday, as the Chinese New Year approached, most market traders were on holiday, significantly reducing market supply. Downstream inquiries and purchases were almost nonexistent, spot premiums slightly declined, and overall trading remained sluggish.
Guangdong: Spot premiums were 40 yuan/mt against Shanghai. Overall, downstream enterprises and factories were mostly on holiday, and market traders also reduced their activities. Early trading saw limited downstream purchases, and with futures prices rising, some traders lowered premiums to facilitate sales. Last Friday, the monthly price spread widened, and spot premiums also declined amid sluggish trading.
Tianjin: Tianjin was on par with Shanghai, with a spot-futures price spread of 0 yuan/mt. Last Friday, futures prices maintained a fluctuating trend, and the market had essentially entered the Chinese New Year break. A few traders restocked before the holiday, but spot supply was limited, and there were virtually no transactions.
Ningbo: Spot premiums were 20 yuan/mt against Shanghai. With the Chinese New Year holiday approaching, no spot quotes were observed in the Ningbo market last Friday. Futures prices rebounded from low levels, spot premiums slightly declined, and the pre-holiday sluggish atmosphere persisted.
Social Inventory: On January 24, LME zinc inventory decreased by 2,700 mt to 188,425 mt, a decline of 1.41%. As of January 23, total zinc ingot inventory across SMM's seven regions was 62,600 mt, an increase of 3,800 mt compared to January 16 and an increase of 3,200 mt compared to January 20, indicating a rise in domestic inventory.
Zinc Price Forecast: The US Fed is expected to keep interest rates unchanged at the upcoming monetary policy meeting and deliver a neutral message for the March meeting. The market is awaiting more data and information on Trump's policies. LME zinc is expected to maintain a fluctuating trend in the short term, awaiting further macroeconomic data for guidance. Due to the Chinese New Year, end-use consumption of zinc has weakened significantly, reducing support for zinc prices. In the short term, zinc prices are expected to fluctuate downward.
