Tariff Disruptions Persist, LME Zinc Center Moves Downward [SMM Morning Meeting Summary]

Futures Market: Overnight, LME zinc opened at $2,846/mt. At the beginning of the session, LME zinc fluctuated around the daily moving average, reaching a high of $2,847.5/mt. Subsequently, with increased short positions, LME zinc fluctuated downward below the daily moving average. After a slight rebound, it pulled back again, hitting a low of $2,805/mt near the session's end, and finally closed down at $2,805.5/mt, a decrease of $39.5/mt or 1.39%. Trading volume decreased to 94,430 lots, while open interest increased by 2,377 lots to 233,000 lots. Overnight, the most-traded SHFE zinc 2504 contract opened at 23,500 yuan/mt. Subsequently, with increased long positions, SHFE zinc rose to a high of 23,670 yuan/mt. However, increased short positions caused SHFE zinc to decline continuously, eventually closing down at 23,525 yuan/mt, a decrease of 70 yuan/mt or 0.30%. Trading volume decreased to 56,889 lots, while open interest increased by 2,308 lots to 92,888 lots.

Macro: Trump announced an investigation into the copper industry; British media reported that Ukraine agreed to a US mineral agreement after the US gave up a potential $500 billion revenue claim; Trump stated that sanctions on Russia would be lifted at some point; US consumer confidence in February recorded the largest monthly decline in over three years; Trump launched a $5 million immigration gold card, and the EB-5 visa program will be canceled; Chinese Premier Qiang Li emphasized accelerating technological innovation in frontier and emerging fields to better cultivate new productive forces and promote high-quality development; Shenzhen set its 2025 economic growth target at 5.5%; DeepSeek is accelerating the launch of its R2 AI model; Baidu acquired YY Live for $2.1 billion; Tesla announced an update to its Autopilot assisted driving feature for urban roads.

Spot Market:

Shanghai: In the early session, the market quoted spot premiums of 0-10 yuan/mt against the average price, with fewer quotes against the futures. During the second trading session, ordinary domestic brands were quoted at discounts of 20-0 yuan/mt against the 2503 contract, Huize was quoted at premiums of 100 yuan/mt against the 2503 contract, Baiyin was quoted on par with the 2503 contract, and high-priced brand Shuangyan had no quotes. Shanghai warehouse inventories continued to increase. The futures market showed a significant decline compared to the previous day, prompting some traders to stand firm on quotes and raise spot premiums. Although some downstream enterprises took advantage of the low prices to make purchases, most downstream enterprises procured raw materials based on orders, resulting in limited overall transaction improvement.

Guangdong: Spot discounts of 10 yuan/mt against Shanghai were observed, narrowing the Shanghai-Guangdong price spread. In the first session, suppliers quoted discounts of 55-25 yuan/mt for Qilin, Mengzi, Huize, Danxia, Feilong, and Lantian zinc. In the second session, Qilin and Mengzi were quoted at discounts of 30-25 yuan/mt against the online price. Overall, the futures market opened lower with a gap yesterday, boosting downstream purchasing enthusiasm. Many enterprises restocked at lower prices, increasing buy orders and slightly improving market transaction sentiment. Spot premiums and discounts also rose slightly compared to the previous day. However, traders reported that downstream demand has not fully recovered, and normalization will take time.

Tianjin: Tianjin's spot discounts were around 20 yuan/mt against Shanghai. By midday, Xinzi was quoted at discounts of 0-20 yuan/mt against the 03 contract, Xikeng delivered at discounts of 30-50 yuan/mt against the 03 contract, Bailin was quoted at discounts of 10 yuan/mt against the 03 contract, and high-priced brand Zijin was quoted at premiums of 0-20 yuan/mt against the 03 contract. The futures market saw a significant pullback yesterday. In the early session, downstream purchasing was active, with restocking observed. Traders raised premiums for sales, but demand did not improve substantially. Later, transactions weakened, and premiums struggled to rise, stabilizing after a slight increase. Overall, market transactions improved compared to the previous day.

Ningbo: Spot discounts of 20 yuan/mt against Shanghai were observed, with mainstream quotes in Ningbo against the 2503 contract. In the first session, Yongchang and Qilin were quoted at discounts of 30 yuan/mt against the 2503 contract, Honglu-V was quoted at premiums of 20 yuan/mt against the 2503 contract, and Huize was quoted at premiums of 50 yuan/mt against the 2503 contract. In the second session, traders' quotes remained unchanged from the first session. Zinc ingots continued to arrive at Ningbo port, replenishing the local market supply. Under the pressure of low prices, downstream enterprises preferred delivered zinc ingots, reducing transactions for self pick-up zinc ingots. However, with the futures market declining compared to the previous day, some downstream enterprises made purchases at lower prices, resulting in moderate spot transaction performance.

Social Inventory: On February 25, LME zinc inventory increased by 3,775 mt to 164,775 mt, up 2.34%. According to SMM, as of February 24, total zinc ingot inventory across seven regions monitored by SMM reached 145,600 mt, an increase of 10,000 mt compared to February 17 and 8,500 mt compared to February 20, indicating a rise in domestic inventory.

Zinc Price Forecast: Overnight, LME zinc recorded a bearish candlestick, with support from the lower Bollinger Band. Overseas social inventories continued to rise, putting pressure on LME zinc. Currently, Trump announced an investigation into the copper industry, with officials indicating his preference for tariffs over quotas, causing ongoing tariff disruptions. Meanwhile, a massive power outage in Chile affected over 98% of the population, prompting the government to declare a "state of disaster," which may impact mining operations. LME zinc is expected to maintain a fluctuating trend in the short term. Overnight, SHFE zinc recorded a bullish candlestick with no lower shadow, facing resistance from multiple moving averages above and support from the lower Bollinger Band. Domestic demand remains unclear, with end-use consumption yet to recover. Additionally, expectations for rising domestic processing fees persist. SHFE zinc is expected to maintain fluctuating movements.