US Retail Data Falls More Than Expected, Zinc Prices Jump Initially and Then Pull Back [SMM Morning Meeting Notes]

Zinc Morning Meeting Summary on February 17

Futures Market:

Last Friday, LME zinc opened at $2,842/mt. In early trading, LME zinc rose steadily above the daily moving average as longs increased positions, peaking at $2,900/mt during European trading hours. Subsequently, with shorts entering and longs closing positions, LME zinc fell below the daily moving average, hitting a low of $2,838/mt by the session's end and closing at $2,838.5/mt, up $1/mt or 0.04%. Trading volume increased to 11,111 lots, and open interest rose by 1,566 lots to 227,000 lots. Last Friday, the most-traded SHFE zinc 2503 contract opened at 24,075 yuan/mt. In early trading, SHFE zinc declined in a stepwise manner as longs exited positions, with the center hovering around 23,720 yuan/mt by the session's end, hitting a low of 23,685 yuan/mt during the day. It closed at 23,710 yuan/mt, down 210 yuan/mt or 0.88%. Trading volume decreased to 90,813 lots, and open interest fell by 2,000 lots to 81,893 lots.

Macro:

US January retail sales recorded the largest monthly decline since January last year; Russian media reported that Russian and US officials will hold a meeting on the Ukraine issue in Saudi Arabia on February 18; a large shipment of US-made heavy bombs arrived in Israel overnight following policy easing by the Trump administration; South Korea experienced a surge in silver investment, with silver bars selling out; Li Qiang emphasized the vigorous development of ice and snow sports and the ice and snow economy; China's January social financing scale increased by 7.06 trillion yuan.

Spot Market:

Shanghai: In early trading, the market quoted spot premiums of 0-20 yuan/mt against the average price, with fewer quotes against the futures contract. During the second trading session, ordinary domestic brands were quoted at premiums of 0-20 yuan/mt against the 2503 contract, high-end brand Shuangyan at premiums of 250 yuan/mt, Huize at premiums of 100 yuan/mt, and Baiyin at parity. As delivery approached, some traders were reluctant to sell at low prices, showing strong sentiment to stand firm on quotes. Last Friday, spot premiums in the Shanghai market remained basically stable. However, the significant rise in futures prices in the morning dampened downstream buying sentiment, and overall transactions were mainly between traders.

Guangdong: Spot discounts of 50 yuan/mt against Shanghai widened the Shanghai-Guangdong price spread. In the first trading session, suppliers quoted discounts of 70-50 yuan/mt for Qilin, Mengzi, and Lantian brands. In the second session, Qilin and Mengzi were quoted at discounts of 50-30 yuan/mt against the online price. Overall, rising zinc prices dampened downstream restocking enthusiasm. With the adjustment of premiums and discounts last Friday, market transactions improved slightly, and downstream buyers made purchases later in the session. However, the overall market atmosphere remained subdued, with downstream consumption still in a recovery phase.

Tianjin: Tianjin's spot discounts were around 20 yuan/mt against Shanghai. By midday, Xinzi was quoted at premiums of 30-40 yuan/mt against the 03 contract, Xikeng at discounts of 30 yuan/mt, Bailing (delivered) at 60 yuan/mt, Sihuan (delivered) at premiums of 30 yuan/mt, and high-end brand Zijin at premiums of 40-50 yuan/mt. Last Friday, the rise in futures prices led to cautious downstream purchasing, with low buying interest. Traders, eager to sell, lowered premiums, resulting in a weaker market compared to the previous day.

Ningbo: Spot premiums of 10 yuan/mt against Shanghai were reported. In the first trading session, Honglu-V was quoted at premiums of 10 yuan/mt against the 2503 contract. In the second session, traders' quotes remained unchanged from the first session. Last Friday, there were few quotes from traders in the market. The significant rise in zinc prices in the morning deterred downstream buyers, with almost no inquiries or purchases. Amid sluggish sales, Ningbo spot premiums continued to decline, and overall spot transactions remained weak.

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