Macro Sentiment Bullish, LME Zinc Surges Significantly [SMM Morning Meeting Notes]

Futures Market: Overnight, LME zinc opened at $2,792.5/mt. At the beginning of the session, LME zinc briefly declined to a low of $2,783.5/mt. Subsequently, with increased long positions, LME zinc rallied throughout the night session to $2,845.5/mt. However, lacking upward momentum, it fluctuated near the daily moving average towards the end of the session and closed higher at $2,825.5/mt, up $35/mt or 1.25%. Trading volume decreased to 10,814 lots, while open interest increased by 1,202 lots to 227,000 lots. Overnight, LME zinc formed a bullish candlestick, with resistance from the 20-day moving average above, and the KDJ indicator showed an upward opening. Overnight, the most-traded SHFE zinc 2503 contract opened at 23,615 yuan/mt. Initially, SHFE zinc fluctuated near the daily moving average. Later, with increased long positions, SHFE zinc edged up to a high of 23,695 yuan/mt. However, with increased short positions, upward momentum weakened, and the center of gravity pulled back to fluctuate near the daily moving average. It eventually closed lower at 23,635 yuan/mt, down 40 yuan or 0.17%. Trading volume decreased to 56,627 lots, while open interest increased by 949 lots to 98,078 lots. Overnight, SHFE zinc formed a small bullish candlestick, with resistance from the 10-day moving average above.
Macro: Media reports revealed a Ukrainian peace plan; the Bank of England cut interest rates by 25 basis points to 4.5%; US Treasury Secretary Besent stated that the US will continue its "strong dollar" policy; the US Treasury Department announced new sanctions on Iran; Deutsche Bank commented that the "valuation discount" of Chinese stocks will disappear.

Spot Market:
Shanghai: This week, zinc ingot arrivals under long-term contracts in the Shanghai market were limited, with smelters remaining the primary suppliers. Some suppliers took the opportunity to further raise spot premium quotes. However, zinc futures prices rebounded significantly compared to the previous day, and the peak resumption period for downstream enterprises has yet to arrive. Overall, market transactions were average.
Guangdong: Spot discounts against Shanghai were 60 yuan/mt, and the Shanghai-Guangdong price spread widened. Overall, zinc prices rose yesterday, coupled with limited downstream operations, leading to sluggish shipments in the Guangdong market. However, some traders showed strong sentiment to stand firm on quotes. Guangdong inventory increased slightly, while the price spread between futures contracts remained unchanged, and spot premiums edged up.

Tianjin: Spot discounts in Tianjin were 10 yuan/mt against Shanghai. Zinc futures prices rose yesterday, while downstream operations were still gradually resuming after the holiday, resulting in weak overall consumption. Trading was mainly conducted by traders, with some showing a slight sentiment to stand firm on quotes. Quotes were limited, and overall market transactions were average.

Ningbo: Spot premiums against Shanghai were 30 yuan/mt. Some zinc ingots under long-term contracts are expected to arrive in the Ningbo market next week. Yesterday, traders in Ningbo adopted a passive approach to shipments, with spot premiums remaining high. However, downstream enterprises showed limited resumption of production, and overall spot transactions remained constrained.

Social Inventory: On February 6, LME zinc inventory decreased by 1,675 mt to 172,475 mt, a decline of 0.96%. As of February 6, total zinc ingot inventory across seven regions monitored by SMM stood at 107,000 mt, an increase of 44,400 mt compared to January 23 and an increase of 36,600 mt compared to January 27, indicating a rise in domestic inventory.

Zinc Price Outlook: From a macro perspective, with no new tariff-related news, the market holds an optimistic outlook for tonight's non-farm payrolls data. The US dollar index rebounded, suppressing the performance of base metals. Domestically, although zinc ingot inventory increased after the Chinese New Year, the growth was below expectations. Additionally, the stock market and base metals showed a synchronized upward trend, with base metals broadly rising. Zinc prices are expected to fluctuate in the short term, awaiting guidance from tonight's non-farm payrolls data.