LME Zinc Inventory Declines All the Way, LME Zinc Fluctuates at Highs [SMM Zinc Morning Meeting Summary]

Zinc Morning Meeting Summary on February 10

Futures Market: Last Friday, LME zinc opened at $2,827/mt, initially dipping to $2,819/mt before quickly rising to fluctuate around $2,850/mt. During the session, it peaked at $2,875/mt but fell near the close, ultimately closing higher at $2,842/mt, up $16.5/mt or 0.58%. Trading volume increased to 11,619 lots, while open interest decreased by 866 lots to 226,000 lots. LME zinc recorded a bullish candlestick, with support from the 5-day moving average below. Last Friday, the most-traded SHFE zinc 2503 contract opened at 24,015 yuan/mt, briefly reaching 24,035 yuan/mt before trending downward. Near the close, it dipped to 23,745 yuan/mt and finally closed down by 220 yuan/mt or 0.92%. Trading volume decreased to 67,770 lots, and open interest fell by 287 lots to 92,762 lots. SHFE zinc recorded a bearish candlestick, with resistance from the 40-day moving average above.

Macro: Trump stated his commitment to purchasing and owning Gaza and is expected to announce new tariffs. US January non-farm payrolls and unemployment rate data fell short of expectations. Israel is set to discuss the second phase of the ceasefire agreement on February 11. Trump revealed he had spoken with Putin, while Russia stated it could neither confirm nor deny this. The National Bureau of Statistics (NBS) reported that January CPI rose 0.5% YoY, while PPI fell 2.3% YoY. The PBOC increased its gold reserves for the third consecutive month. The Ministry of Industry and Information Technology (MIIT) announced that three major telecom companies have fully integrated the DeepSeek open-source large model.

Spot Market:

Shanghai: Although suppliers maintained a sentiment to stand firm on quotes, Yuguang and Honglu zinc ingots gradually arrived in the Shanghai market, with other brands still in transit. The market expects a significant increase in supply this week. Coupled with continued futures market gains, downstream enterprises showed limited resumption of operations, with few inquiries or purchases. Overall market transactions were sluggish. Continued attention is needed on zinc ingot arrivals this week.

Guangdong: Spot premiums stood at 50 yuan/mt against Shanghai. Overall, premiums showed a downward trend. Early in the session, traders quoted higher premiums, but as the futures market rose, sluggish sales led traders to lower premiums. Market transactions were moderate. Some enterprises are preparing to resume production soon, but a full recovery in downstream consumption will take time.

Tianjin: Tianjin was on par with Shanghai. The futures market continued to rise, while post-holiday downstream operations were gradually resuming. There was limited restocking for immediate needs, with few downstream purchases. Overall consumption remained weak, dominated by trader activity. Expectations for arrivals this week were low, with some sentiment to stand firm on quotes. Overall market transactions were moderate.

Ningbo: Spot premiums stood at 40 yuan/mt against Shanghai. During the first time slot, Qilin quoted premiums of 170-200 yuan/mt against the 2503 contract (delivered), while Honglu-v quoted premiums of 110 yuan/mt against the 2503 contract. During the second time slot, trader quotes remained unchanged from the previous period. Traders adopted a passive quoting approach, with spot premiums remaining high. However, many Ningbo downstream zinc alloy plants are resuming operations this week. Market transactions remained sluggish, with continued attention on enterprise resumption this week.

Social Inventory: On February 7, LME zinc inventory decreased by 2,025 mt to 170,450 mt, down 1.17%. As of February 6, total zinc ingot inventory across seven regions monitored by SMM stood at 107,000 mt, up 44,400 mt from January 23 and 36,600 mt from January 27, indicating a domestic inventory buildup.

Zinc Price Outlook: US January seasonally adjusted non-farm payrolls fell more than market expectations, coupled with a continuous decline in LME zinc inventory, with low inventory supporting LME zinc to fluctuate at highs. Over the two weeks following the Chinese New Year, zinc ingot inventory buildup persisted, combined with a significant rise in February domestic zinc concentrate TCs, weakening fundamental support for zinc prices. SHFE zinc fell back from highs. However, with the peak period of downstream enterprise resumption approaching, subsequent zinc price declines are expected to be limited.