Bullish Funds Exit, LME Zinc Fluctuates Downward [SMM Morning Meeting Summary]

Zinc Morning Meeting Summary on March 20

Futures Market: Overnight, LME zinc opened at $2,956/mt. After a brief dip at the beginning of the session, long positions increased, pushing the price to a high of $2,974/mt. During European trading hours, profit-taking by longs led LME zinc to fluctuate downward. Entering the night session, LME zinc accelerated its decline, hitting a low of $2,914.5/mt. By the end of the session, the center fluctuated around $2,925/mt, closing down at $2,927.5/mt, a decrease of $32.5/mt or 1.1%. Trading volume decreased to 11,549 lots, and open interest fell by 3,832 lots to 222,000 lots. Overnight, the most-traded SHFE zinc 2505 contract opened lower with a gap at 23,840 yuan/mt. Bearish funds flowed in, causing SHFE zinc to fluctuate downward, with the center operating below the daily average line. During the session, it hit a low of 23,710 yuan/mt and closed down at 23,750 yuan/mt, a decrease of 90 yuan/mt or 0.38%. Trading volume decreased to 70,295 lots, while open interest increased by 4,737 lots to 128,000 lots.

Macro: The US Fed kept interest rates unchanged but slowed the pace of balance sheet reduction. Russia did not rule out the possibility of a meeting between Putin and Trump in Saudi Arabia. The Israeli military resumed ground operations in Gaza. Reports indicated that the EU would tighten steel import quotas starting April 1. Political turmoil triggered a crisis in Turkey, leading to a simultaneous plunge in its stock, bond, and currency markets.

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. In the second trading session, ordinary domestic brands were quoted at premiums of 10-20 yuan/mt against the 2504 contract, Huize at a premium of 80 yuan/mt, and high-end brand Shuangyan at premiums of 60-70 yuan/mt. The futures market maintained a fluctuating trend yesterday. Downstream buyers had purchased more previously and held certain inventories, leading to low buying sentiment yesterday. Market traders actively sold, but spot transactions were average overall, with premiums remaining stable. Attention should be paid to the subsequent release of warrants.

Guangdong: Spot discounts of 20 yuan/mt against Shanghai were maintained, with the Shanghai-Guangdong price spread unchanged. In the first session, suppliers quoted Qilin, Mengzi, Danxia, and Lantian zinc at discounts of 15 yuan/mt to premiums of 5 yuan/mt. In the second session, Qilin, Huize, and Lantian zinc were quoted at discounts of 15 yuan/mt to premiums of 5 yuan/mt against online prices. Overall, the price spread between futures contracts narrowed yesterday, and zinc prices maintained a fluctuating trend. Some downstream buyers chose to make small purchases at current price levels, slightly improving market trading sentiment. Spot premiums rose, but trading activity in the second session slightly weakened.

Tianjin: Tianjin quoted spot discounts of around 20 yuan/mt against Shanghai. By midday, Xinzi was quoted at premiums of 30-50 yuan/mt against the 04 contract. Factory-delivered Xikuang Jinli was quoted at discounts of 20-30 yuan/mt, while Bailin delivered to factories was quoted at 60 yuan/mt. High-end brand Zijin was quoted at premiums of 50-70 yuan/mt. Zinc prices slightly pulled back yesterday. After the previous day's price drop, downstream restocking increased, but purchase willingness declined yesterday. Factory-delivered prices were lower and volumes larger, making them more acceptable to downstream buyers. However, self pick-up zinc ingot volumes were limited, and traders showed a firm stance on quotes. The price spread between factory delivery and warehouse pick-up widened, with active trading among traders. Overall, market transactions were average.

Ningbo: Spot premiums of 30 yuan/mt against Shanghai were reported. In the first session, Yongchang and Qilin were quoted at premiums of 40 yuan/mt against the 2504 contract. In the second session, traders' quotes remained unchanged from the first session. Some traders completed shipments the day before, and fewer shipments were made in Ningbo yesterday. Spot premiums slightly increased, but with the futures market fluctuating, some enterprises continued to hold a bearish outlook, resulting in limited inquiries and purchases. Overall, spot transactions were average.

Social Inventory: On March 19, LME zinc inventory decreased by 725 mt to 156,150 mt, a drop of 0.46%. 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 buildup in domestic inventory.

Zinc Price Forecast: Overnight, LME zinc recorded three consecutive bearish candlesticks, with the daily candlestick center moving downward. The 20-day moving average below provided support. The US Fed's interest rate decision met expectations by remaining unchanged, and the US dollar index jumped initially and then pulled back. Coupled with long positions exiting, LME zinc fluctuated downward. Overnight, SHFE zinc recorded a bearish candlestick, with resistance from multiple moving averages above. Dragged down by the decline in overseas markets and the weak performance of ferrous metals prices, SHFE zinc fluctuated downward. However, the absence of significant inventory buildup in social stocks limited the decline in zinc prices.