Bears Increase Positions to Suppress LME Zinc, Which Stops Rising and Starts to Fall [SMM Morning Meeting Summary]

Zinc Morning Meeting Summary on March 18

Futures Market: Overnight, LME zinc opened at $2,980/mt. At the beginning of the session, LME zinc quickly hit a high of $2,991/mt before its center shifted below the daily average line. During European trading hours, it attempted to break upward but failed, and its center moved downward to around $2,960/mt during the night session. By the end of the session, it dipped to $2,955/mt and closed down at $2,960/mt, a decrease of $25.5/mt or 0.85%. Trading volume decreased to 10,323 lots, and open interest fell by 2,347 lots to 225,000 lots. Overnight, the most-traded SHFE zinc 2505 contract opened at an intraday high of 24,160 yuan/mt. At the beginning of the session, longs exited the market, causing SHFE zinc to drop quickly, with its center fluctuating near the daily average line. During the session, it hit a low of 24,005 yuan/mt and eventually closed down at 24,025 yuan/mt, a decrease of 180 yuan/mt or 0.74%. Trading volume decreased to 56,710 lots, and open interest fell by 488 lots to 124,000 lots.

Macro: Trump and Putin are set to hold talks on ending the war, focusing on power plants and the cession of Ukrainian territories. US retail sales in February rebounded slightly, while uncertainties surrounding tariffs and federal government layoffs intensified. The OECD stated that escalating trade wars are weakening the US economic outlook, while China's economy shows resilience.

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 futures. During the second trading session, ordinary domestic brands were quoted at premiums of 0-20 yuan/mt against the SHFE 2504 contract, Baiyin at premiums of 10 yuan/mt, Huize at premiums of 50 yuan/mt, and high-end brand Shuangyan at premiums of 40-50 yuan/mt. With zinc prices fluctuating at highs and yesterday being the last delivery day, market traders showed low willingness to sell at lower prices and stood firm on quotes for spot cargoes. Spot premiums in Shanghai rose slightly yesterday. However, downstream buyers continued purchasing as needed, and overall market transactions remained average.

Guangdong: In the first session, suppliers quoted Kirin, Mengzi, Huize, Feilong, and Lantian zinc at discounts of 35-5 yuan/mt. In the second session, Kirin, Huize, and Lantian zinc were quoted at discounts of 30-15 yuan/mt against the online price. Overall, recent zinc price increases above 24,000 yuan/mt have suppressed downstream purchasing enthusiasm, with enterprises primarily making just-in-time procurement. Stocking demand has declined. Spot transactions in Guangdong were average yesterday, with sluggish market activity, and spot premiums remained unchanged from last Friday.

Tianjin: Tianjin's prices were around 20 yuan/mt lower than Shanghai's. By midday, Xinzi was quoted at premiums of 10-30 yuan/mt against the SHFE 2504 contract, Xikeng at discounts of 10-40 yuan/mt, Bailin at premiums of 40 yuan/mt, and high-end brand Zijin at premiums of 20-50 yuan/mt. Zinc prices fluctuated at highs yesterday, leading downstream buyers to adopt a wait-and-see approach with low purchasing enthusiasm, mainly consuming existing inventories. However, trading among traders was relatively active. As delivery approached, overall premiums remained stable, and market transactions were poor.

Ningbo: Spot premiums were 20 yuan/mt higher than Shanghai's. In the first session, Kirin was quoted at premiums of 70 yuan/mt delivered against the SHFE 2504 contract, Honglu-V at premiums of 20 yuan/mt, and Huize at premiums of 70 yuan/mt. In the second session, traders' quotes remained unchanged from the first session. Zinc ingots continued to arrive in the Ningbo market, with many traders selling. However, downstream purchasing was weak. Spot premiums in Ningbo remained basically stable yesterday, with traders adopting a passive selling approach, and transactions showed no improvement.

Social Inventory: On March 17, LME zinc inventory decreased by 1,275 mt to 158,225 mt, a decline of 0.80%. According to SMM, as of March 17, total zinc ingot inventory across seven regions monitored by SMM stood at 138,800 mt, an increase of 3,000 mt from March 10 and 2,900 mt from March 13, indicating a rise in domestic inventory.

Zinc Price Forecast: Overnight, LME zinc stopped rising and started to fall, with the KDJ indicator narrowing. US February retail sales growth fell short of expectations, and increased short positions pressured LME zinc downward. SHFE zinc recorded a bearish candlestick overnight, with support provided by the 60-day moving average. With zinc prices fluctuating at highs, downstream enterprises remained cautious in their purchases. SMM social inventory increased by 2,900 mt to 138,800 mt, limiting zinc price gains.