LME Continues Destocking, LME Zinc Rebounds From Low Levels [SMM Zinc Morning Meeting Summary]

Zinc Morning Meeting Summary on February 13

Futures Market: Overnight, LME zinc opened at $2,826.5/mt, initially dipped to $2,821/mt, then climbed steadily after the opening, reaching a high of $2,873/mt during the night session. It subsequently hovered above the daily moving average and closed up at $2,866/mt, an increase of $38.5/mt or 1.36%. Trading volume rose to 10,900 lots, and open interest increased by 749 lots to 227,000 lots. LME zinc formed a bullish candlestick, with support from the 10-day moving average below. Overnight, the most-traded SHFE zinc 2503 contract opened at 23,835 yuan/mt, slightly declined to a low of 23,740 yuan/mt after the opening, then rebounded to hover above the daily moving average. Near the session's end, it reached a high of 23,885 yuan/mt and closed up at 23,870 yuan/mt, an increase of 70 yuan/mt or 0.29%. Trading volume decreased to 46,984 lots, and open interest fell by 752 lots to 89,402 lots. SHFE zinc formed a bullish candlestick, with resistance from the 40-day moving average above.

Macro: US CPI data exceeded expectations across the board. Trump stated that he might sign a reciprocal tariff executive order on Wednesday local time. Trump held talks with Putin and Zelensky, mentioning a potential meeting with Putin in Saudi Arabia. Powell indicated that the US Fed might have to adjust interest rates in response to tariff policies. The Ministry of Foreign Affairs announced plans to continuously optimize entry policies and expand the list of visa-free countries. China's manned lunar exploration mission has entered the prototype development phase for lunar suits and manned lunar rovers.

Spot Market:

Shanghai: Early morning market average prices showed spot premiums of 0-10 yuan/mt. Kirin zinc ingots arrived in the Shanghai market, increasing supply. However, with futures prices rebounding from lows in the morning, downstream enterprises showed low purchase willingness. Shanghai traders continued to face sluggish sales, and spot premiums declined further compared to the previous day. Continued attention is needed on subsequent enterprise resumption.

Guangdong: Spot discounts of 30 yuan/mt against Shanghai. Overall, consumption activity in Guangdong has not yet picked up, with evident lack of enthusiasm. Traders faced difficulties in selling, but due to the general rise in long-term contract prices this year, there was limited room for price adjustments. Meanwhile, with futures prices rising, spot transactions were average.

Tianjin: Spot discounts of around 10 yuan/mt against Shanghai. Futures prices were mostly range-bound yesterday, with a significant pullback overnight. Downstream restocked actively at lower prices, but the slight price rebound yesterday compared to the previous day failed to meet downstream psychological price levels, leading to reduced purchases. Traders slightly raised quotes in the first session but lowered premiums later due to poor sales, resulting in sluggish overall market activity.

Ningbo: Spot premiums of 30 yuan/mt against Shanghai. Ningbo traders continued to quote conservatively, with spot premiums declining MoM. However, downstream inquiries remained limited, and overall market transactions were weak. Attention is needed on downstream resumption after the Lantern Festival.

Social Inventory: On February 13, LME zinc inventory decreased by 2,325 mt to 164,625 mt, down 1.39%. As of February 10, SMM's seven-region zinc ingot inventory totaled 118,700 mt, up 48,300 mt from January 27 and up 11,700 mt from February 6, indicating a domestic inventory buildup.

Zinc Price Outlook: US January non-seasonally adjusted CPI exceeded market expectations. However, LME zinc inventory has been in a destocking trend since last year, with low inventory providing some support for zinc prices. LME zinc's center slightly rebounded. Fundamentals side, zinc ingot inventory continued to build up after the Chinese New Year, but downstream enterprises are expected to fully resume operations after the Lantern Festival. The market anticipates some post-holiday consumption recovery. SHFE zinc is expected to hover at highs, with continued focus on downstream consumption recovery.