Bearish Funds Exit, LME Zinc Center Moves Upward [SMM Morning Meeting Summary]

Zinc Morning Meeting Summary on February 18

Futures Market: Overnight, LME zinc opened at $2,841/mt. At the beginning of the session, LME zinc fluctuated upward above the daily moving average. During European trading hours, it briefly pulled back, with its center shifting near the daily moving average for consolidation. Entering the night session, LME zinc accelerated upward, peaking at $2,876.5/mt before closing at $2,871.5/mt, up $33/mt or 1.16%. Trading volume decreased to 6,203 lots, and open interest fell by 756 lots to 226,000 lots. Overnight, the most-traded SHFE zinc 2503 contract opened at 23,830 yuan/mt. Initially, SHFE zinc fluctuated around the daily moving average. Later, as shorts exited the market, SHFE zinc's center moved above the daily moving average. By the end of the session, it accelerated upward, peaking at 23,985 yuan/mt and closing at 23,970 yuan/mt, up 155 yuan/mt or 0.65%. Trading volume decreased to 37,178 lots, and open interest fell by 844 lots to 74,084 lots.

Macro: US Fed's Harker stated that the current economic situation supports temporarily maintaining stable interest rate policies. Sources indicated that OPEC+ is considering delaying the April oil production increase, which was denied by Russia's Deputy Prime Minister. Russia will discuss a comprehensive ban on gasoline exports on February 20. Zelensky is set to visit Saudi Arabia on Wednesday (a day after US-Russia talks). Xi Jinping emphasized that it is an opportune time for private enterprises and entrepreneurs to thrive.

Spot Market:

Shanghai: In the early session, the market quoted spot premiums of 0-20 yuan/mt against the average price, with fewer quotes against the contract. During the second trading session, ordinary domestic brands were quoted at premiums of 0-20 yuan/mt against the 2503 contract. High-end brands like Shuangyan were quoted at premiums of 150-180 yuan/mt, Huize at 100 yuan/mt, and Baiyin at 10 yuan/mt. Yesterday was the last trading day before delivery, and some traders continued to stand firm on quotes. Overall, spot premiums were basically flat compared to last Friday. Despite the futures market's pullback, downstream inquiries and purchases remained moderate, and overall spot transactions in Shanghai showed no significant improvement.

Guangdong: Spot discounts against Shanghai were 50 yuan/mt, with the Shanghai-Guangdong price spread remaining stable. In the first session, suppliers quoted Kirin, Mengzi, and Lan zinc at discounts of 50-20 yuan/mt. In the second session, Kirin was quoted at a discount of 45 yuan/mt against the online price. Overall, the futures market fluctuated, and downstream orders showed no improvement. The overall market trading sentiment was sluggish. Some traders paused shipments amid low premiums, waiting for better opportunities, while others lowered premiums to facilitate sales. Current spot transactions were weak, and a recovery in consumption will take time.

Tianjin: Tianjin's spot discounts against Shanghai were around 10 yuan/mt. By midday, Xinzi was quoted at premiums of 0-20 yuan/mt against the 03 contract, Xikeng delivered at 0-50 yuan/mt, Bailing (delivered) at around 60 yuan/mt, Sihuan delivered at 0-30 yuan/mt, and high-end brand Zijin at 20-30 yuan/mt. The futures market pulled back yesterday, prompting some downstream buyers to restock at lower prices, though mainly for immediate needs. However, zinc ingot volumes in Tianjin warehouses were below expectations. Self pick-up premiums for zinc ingots slightly rebounded, but overall market activity remained moderate.

Ningbo: Spot prices were on par with Shanghai. In the first session, Kirin was quoted on par with the 2503 contract, Honglu-V at a premium of 20 yuan/mt, and Huize at 100 yuan/mt. In the second session, traders' quotes remained unchanged from the first session. Over the weekend, long-term contract zinc ingots continued to arrive in the Ningbo market. With futures prices rebounding from lows in the morning, some traders sold at parity, causing spot premiums to decline slightly. Downstream buyers actively purchased low-priced zinc ingots, but other suppliers' transactions remained sluggish. Overall trading was moderate, and further attention is needed on downstream consumption recovery.

Social Inventory: On February 17, LME zinc inventory decreased by 1,625 mt to 161,025 mt, a drop of 1%. According to SMM, as of February 17, total zinc ingot inventory across seven regions tracked by SMM was 135,600 mt, up by 12,300 mt from February 13 and 16,900 mt from February 10, indicating an increase in domestic inventory.

Zinc Price Forecast: Overnight, LME zinc recorded a bullish candlestick, with resistance at the 40-day moving average and support at the 10-day moving average. The weak US dollar overnight supported zinc prices, and short positions exited, lifting LME zinc's center. SHFE zinc recorded a small bullish candlestick overnight, with the MACD bullish bar expanding. Domestic macro sentiment improved, but with consumption falling short of expectations, social inventory continued to rise. Zinc prices are expected to fluctuate rangebound.