Overseas Inventories Increased, LME Zinc Pulled Back [SMM Morning Meeting Summary]

Futures Market: Overnight, LME zinc opened at $2,915/mt, with its center fluctuating around the daily moving average. It reached a high of $2,926.5/mt before entering the European trading session, where bears increased positions, driving LME zinc downward to a low of $2,845/mt. It eventually closed at $2,845/mt, down $75/mt or 2.57%. Trading volume increased to 110,000 lots, and open interest rose by 920 lots to 231,000 lots. Overnight, the most-traded SHFE zinc 2504 contract opened at 23,850 yuan/mt, quickly hitting a high of 23,870 yuan/mt. However, with bears increasing positions, the center of SHFE zinc fluctuated downward below the daily moving average. During this period, a tug-of-war between longs and shorts caused SHFE zinc to briefly hover around the daily moving average before fluctuating around 23,690 yuan/mt. It eventually closed at 23,680 yuan/mt, down 310 yuan/mt or 1.29%. Trading volume decreased to 73,485 lots, while open interest increased by 4,581 lots to 86,443 lots.

Macro: Trump stated that Putin would accept Europe's deployment of peacekeeping forces to Ukraine, and Ukraine is expected to sign a mining agreement this week or next. Putin mentioned that Russia and the US could agree to reduce armaments by 50% and plans to resume aluminum product exports to the US. Macron noted that the mining agreement would help safeguard Ukraine's sovereignty and agreed that Europe would bear the costs and burdens of the Russia-Ukraine conflict. Iraq's oil minister announced that oil exports from the Kurdistan region would resume within a week. Trump confirmed that tariffs on Canada and Mexico would be imposed on schedule. President Xi Jinping emphasized that regardless of international changes, China-Russia relations would continue steadily. CSRC Chairman Wu Qing stated that priority would be given to supporting technology enterprises in financing, mergers, and acquisitions for key core technology breakthroughs. Tesla is reportedly preparing to deploy FSDw in China.

Spot Market:

Shanghai: In the early session, the market quoted spot zinc at a discount of 0-10 yuan/mt to the average price, with fewer quotes against the futures market. During the second trading session, ordinary domestic brands were quoted at discounts of 30-20 yuan/mt against the SHFE 2503 contract, Huize at a premium of 70 yuan/mt, Baiyin at a discount of 20 yuan/mt, and high-priced brand Shuangyan at premiums of 90-100 yuan/mt. Zinc ingot warehouse warrants continued to flow out, and Shanghai market traders remained actively selling. However, with the futures market hovering at highs in the morning and downstream orders recovering slowly, downstream enterprises mainly purchased raw materials as needed, resulting in average zinc ingot transactions yesterday and spot premiums remaining low.

Guangdong: Spot premiums were 20 yuan/mt higher than in Shanghai. In the first session, suppliers quoted Qilin, Mengzi, Huize, Feilong, and Lantian zinc at discounts of 80-50 yuan/mt. In the second session, Qilin, Mengzi, and Lantian zinc were quoted at discounts of 60-50 yuan/mt to the online price. Overall, traders reported that downstream consumption in Guangdong remained weak, with orders still recovering. Most enterprises focused on restocking as needed, leading to sluggish market transactions. Some traders continuously lowered premiums to facilitate sales, causing spot premiums and discounts to decline yesterday.

Tianjin: Tianjin's spot zinc was quoted at a discount of approximately 10 yuan/mt compared to Shanghai. By midday, Xinzi was quoted at discounts of 0-30 yuan/mt against the SHFE 2503 contract, Xikeng at discounts of 0-40 yuan/mt, Bailing (delivered) at a premium of 20 yuan/mt, and high-priced brand Zijin at discounts of 10-10 yuan/mt. Although the futures market pulled back slightly yesterday, downstream buyers remained cautious, with low purchasing willingness. Most downstream enterprises focused on restocking as needed or consuming existing inventories. Traders showed little willingness to further lower premiums, keeping overall premiums relatively stable. Market transactions were average.

Ningbo: Spot zinc was quoted on par with Shanghai. In the first session, Qilin was quoted at a discount of 30 yuan/mt against the SHFE 2503 contract, Honglu-V at parity, and Huize at a premium of 100 yuan/mt. In the second session, traders maintained quotes from the previous session. Ningbo market saw ample zinc ingot supply with active trader sales, but downstream purchasing sentiment remained low. Some traders continued to lower spot quotes to facilitate sales, causing Ningbo premiums to decline further. Overall transactions yesterday showed no improvement compared to last week.

Social Inventory: On February 24, LME zinc inventory increased by 7,400 mt to 161,000 mt, up 4.82%. According to SMM, as of February 24, total zinc ingot inventory across seven regions monitored by SMM reached 145,600 mt, up 10,000 mt from February 17 and 8,500 mt from February 20, indicating a rise in domestic inventory.

Zinc Price Forecast: Overnight, LME zinc recorded a bearish candlestick with its upper side suppressed by the 60-day moving average and its lower side supported by the 20-day moving average. The current international situation remains uncertain, and the increase in overseas inventories has led to a slight decline in LME zinc. Similarly, SHFE zinc recorded a bearish candlestick overnight, with its upper side suppressed by the 10-day and 60-day moving averages and its lower side supported by the lower Bollinger Band. Domestic inventories also increased, and consumption is expected to gradually recover over time. In the short term, zinc prices are likely to fluctuate, with macroeconomic developments warranting close attention.