US Dollar Index Continues to Decline, LME Zinc Center Rises [SMM Morning Meeting Summary]

SMM Zinc Morning Meeting Notes on March 6
Futures Market: Overnight, LME zinc opened at $2,820/mt. At the beginning of the session, LME zinc fluctuated downward along the daily moving average, hitting a low of $2,809/mt. During the European trading hours, shorts exited to avoid risks, and LME zinc fluctuated upward, closing at the intraday high of $2,886/mt, up $66.5/mt or 2.36%. Trading volume increased to 12,937 lots, while open interest decreased by 3,843 lots to 222,000 lots. Overnight, the most-traded SHFE zinc 2504 contract opened at 23,800 yuan/mt. After a brief decline to a low of 23,690 yuan/mt, the contract saw increased long positions and broke through the daily moving average, peaking at 23,870 yuan/mt by the end of the session. It closed at 23,865 yuan/mt, up 220 yuan/mt or 0.93%. Trading volume decreased to 69,560 lots, while open interest increased by 2,786 lots to 88,213 lots.
Macro: The White House announced that Trump will grant a one-month tariff exemption for cars imported under the USMCA agreement. In his congressional address, Trump stated that reciprocal tariffs will take effect on April 2. Ukraine is preparing to sign a mineral agreement. The chip law should be abolished. The US CIA claimed it has stopped providing intelligence to Ukraine. US officials stated that if an agreement on minerals is reached, the suspension of aid to Ukraine will be lifted. The US ADP employment data for February fell short of expectations. US media revealed that the US and Hamas have held secret talks on the Gaza hostage issue. China's main development targets for 2025 include GDP growth of around 5% and a consumer price index increase of about 2%. According to the drafting group of the Government Work Report, policies should be implemented decisively to maximize their effectiveness. For the first time, the requirement to "stabilize the real estate and stock markets" was included in the general requirements of the Government Work Report. Domestic refined oil prices saw a "second consecutive drop."
Spot Market
Shanghai: In the early session, the market quoted spot premiums of 10-20 yuan/mt over the average price, with limited quotes against the futures contract. During the second trading session, ordinary domestic brands were quoted at premiums of 10-20 yuan/mt against the 2504 contract, Baiyin at premiums of 30 yuan/mt, Huize at premiums of 80-100 yuan/mt, and high-end brand Shuangyan at premiums of 100 yuan/mt. The futures market saw a slight decline compared to the previous day. Traders were reluctant to sell at low prices, and spot premiums remained firm. However, downstream inquiries and purchases were moderate, and overall transactions in the market were mainly between traders.
Guangdong: Spot discounts of 10 yuan/mt against Shanghai were observed, widening the Shanghai-Guangdong price spread. In the first session, suppliers quoted Qilin, Mengzi, Huize, Feilong, and Lantian brands at discounts of 5 yuan/mt to premiums of 15 yuan/mt. In the second session, Qilin, Mengzi, Huize, and Lantian were quoted at discounts of 5 yuan/mt to premiums of 15 yuan/mt against the online price. Overall, the slight pullback in the futures market improved some traders' transactions compared to the previous day, and spot premiums rose slightly. However, downstream demand remained moderate, with end-users primarily restocking on dips. Actual consumption improvement still requires time.
Tianjin: Tianjin prices were on par with Shanghai. By midday, Xinzi was quoted at premiums of 50-60 yuan/mt against the 04 contract, Xikuang at discounts of 0-20 yuan/mt, Bailing at premiums of 40-50 yuan/mt, and high-end brand Zijin at premiums of 60-80 yuan/mt. The slight pullback in the futures market prompted some downstream enterprises to restock on dips. Due to good sales last week, spot inventory was relatively low. The price spread between self pick-up from warehouses and delivery-to-factory prices widened. Some traders maintained firm quotes, leading to dispersed quotations. Overall market transactions were moderate.
Ningbo: Spot premiums of 30 yuan/mt against Shanghai were observed, with mainstream quotes in Ningbo against the 2503 contract. In the first session, Qilin was quoted at premiums of 30-40 yuan/mt against the 2504 contract, Honglu-V at premiums of 40 yuan/mt, and Baiyin at premiums of 30 yuan/mt. In the second session, traders' quotes remained unchanged from the first session. Some traders in Ningbo completed their sales yesterday and did not quote, while others maintained firm quotes. Spot premiums in Ningbo rose slightly, but downstream manufacturers continued to purchase on a need-only basis. Overall spot transactions showed little change from the previous day.
Social Inventory: On March 5, LME zinc inventory decreased by 625 mt to 161,325 mt, a drop of 0.39%. According to SMM, as of Monday (March 3), total zinc ingot inventory across seven regions tracked by SMM stood at 136,500 mt, down 9,100 mt from February 24 and 8,800 mt from February 27, indicating a decline in domestic inventory.
Zinc Price Forecast: Overnight, LME zinc recorded a long bullish candlestick. Concerns over the impact of tariffs on inflation and the economy have led investors to price in the possibility of a full-scale economic contraction in the US. Additionally, Trump's delay of some auto tariffs and the decline in the US dollar index supported a broad rally in base metals, with LME zinc expected to remain at high levels with fluctuations. Overnight, SHFE zinc also recorded a bullish candlestick. Improved macro sentiment, the inclusion of "stabilizing the real estate and stock markets" in the Government Work Report, and positive expectations from the Two Sessions provided support. Coupled with the boost from the overseas market, SHFE zinc's center shifted upward. Zinc prices are expected to fluctuate within a range.