International Disputes Ease, Zinc Prices Rise Again [SMM Morning Meeting Notes]

Zinc Morning Meeting Summary on February 19

Futures Market: Overnight, LME zinc opened at $2,868/mt. At the beginning of the session, LME zinc dipped to $2,854/mt and then consolidated around the daily moving average. Subsequently, bears exited the market, and LME zinc fluctuated upward, operating above the daily moving average. During the night session, the center shifted upward to around $2,890/mt, and it finally closed higher at $2,889.5/mt, up $18/mt or 0.63%. Trading volume increased to 7,747 lots, while open interest decreased by 2,782 lots to 223,000 lots. Overnight, the most-traded SHFE zinc 2503 contract opened higher with a gap at 24,010 yuan/mt. SHFE zinc fluctuated rangebound around the daily moving average, with an amplitude of less than 100 yuan/mt. It eventually closed higher at 23,990 yuan/mt, up 100 yuan/mt or 0.42%. Trading volume decreased to 34,898 lots, and open interest fell by 1,049 lots to 70,819 lots.

Macro: Trump stated that the auto tariff rate would be approximately 25%; he also mentioned the possibility of meeting with Putin by the end of this month. Sources revealed that the US and Russia proposed a three-phase peace plan. The G7 group is considering tightening the price cap on Russian oil. Pan Gongsheng announced plans to implement more proactive fiscal policies and moderately loose monetary policies. The National Development and Reform Commission (NDRC) expressed support for private enterprises to actively participate in the "Two Major and Two New" initiatives.

Spot Market:

Shanghai: In the early session, the market quoted premiums of 0-20 yuan/mt against the average price, with fewer quotes against the futures. 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 100 yuan/mt, Huize at 50 yuan/mt, and Baiyin at parity. No warehouse warrants were released. Yesterday, market quotations from traders were basically stable. Although most downstream enterprises resumed operations after the holiday, overall spot consumption remained weak. During the morning session, futures fluctuated at highs, and transactions were also average.

Guangdong: Spot discounts against Shanghai were 20 yuan/mt. In the first session, suppliers quoted Kirin, Mengzi, Feilong, and Lantian zinc at discounts of 30-10 yuan/mt. In the second session, Kirin and Mengzi were quoted at discounts of 30 yuan/mt against the online price. Overall, the Guangdong market rolled over to the 2504 contract yesterday. Some brands had limited spot availability, leading to an increase in premiums. Meanwhile, downstream consumption showed slight improvement, and transactions slightly picked up, but overall performance remained average. Premiums and discounts in Guangdong rose slightly yesterday.

Tianjin: Tianjin's discount against Shanghai was around 10 yuan/mt. By midday, Xinzi was quoted at premiums of 0-20 yuan/mt against the 03 contract, Xikeng at parity, Bailing (delivered) at around 60 yuan/mt, Sihuan (delivered) at premiums of 0-30 yuan/mt, and high-end brands like Zijin at premiums of 20-30 yuan/mt. Yesterday, futures prices rebounded slightly, but downstream buyers were cautious due to high prices, focusing on restocking for immediate needs. Traders showed a slight tendency to stand firm on quotes, with low willingness to sell at discounts. Overall premiums remained stable, and market transactions were average.

Ningbo: Spot prices were on par with Shanghai. In Ningbo, mainstream quotations were made against the 2503 contract. In the first session, Kirin was quoted at parity, while Honglu-V was quoted at a premium of 10 yuan/mt against the 2503 contract. In the second session, traders' quotations remained unchanged from the first session. Kirin zinc ingots continued to arrive in the Ningbo market, ensuring ample supply. However, post-holiday zinc alloy manufacturers mainly purchased raw materials based on orders. With futures prices continuing to rise in the morning, downstream inquiries were limited. Premiums in Ningbo operated at low levels, and spot transactions were primarily driven by enterprises' immediate purchasing needs.

Social Inventory: On February 18, LME zinc inventory decreased by 2,275 mt to 158,750 mt, a decline of 1.41%. According to SMM, as of February 17, total zinc ingot inventory across seven regions monitored by SMM reached 135,600 mt, an increase of 12,300 mt compared to February 13 and 16,900 mt compared to February 10, indicating a rise in domestic inventory.

Zinc Price Forecast: Overnight, LME zinc recorded a bullish candlestick, with the daily candlestick center shifting upward. International tensions eased, and bearish funds exited the market. However, the US plans to continue imposing tariffs, limiting the price increase. Overnight, SHFE zinc recorded a small bearish candlestick, with the 20-day moving average providing support below. Domestically, more proactive fiscal and monetary policies are expected to be implemented, supporting private enterprises' participation in the "Two Major and Two New" initiatives. Market sentiment was relatively positive, and zinc prices fluctuated at highs.