US Dollar Strength Puts Pressure on LME Zinc to Decline [SMM Morning Meeting Summary]

March 21 Zinc Morning Meeting Summary

Futures: Overnight, LME zinc opened at $2,929/mt. At the start of the session, increased long positions pushed LME zinc to a high of $2,955/mt. Subsequently, shorts entered at higher levels, causing LME zinc to fluctuate around the daily moving average. With further short positions, LME zinc dipped to a low of $2,901.5/mt during the night session. The center of gravity returned to the daily moving average by the end of the session, closing down at $2,919/mt, a decrease of $85/mt or 0.29%. Trading volume increased to 12,536 lots, and open interest increased by 978 lots to 223,000 lots. Overnight, the most-traded SHFE zinc contract opened at 23,785 yuan/mt. Initially, a tug-of-war between longs and shorts caused SHFE zinc to fluctuate narrowly around the daily moving average, with a low of 23,745 yuan/mt. As long positions increased, the center of gravity of SHFE zinc shifted upward, reaching a high of 23,855 yuan/mt by the end of the session. It closed up at 23,840 yuan/mt, an increase of 80 yuan/mt or 0.34%. Trading volume decreased to 66,741 lots, and open interest decreased by 771 lots to 124,000 lots.

Macro: Trump urged the US Fed to cut interest rates; Russian and US delegations may hold talks in Riyadh on the 24th; Trump signed an executive order to expedite mining, including copper and gold; the US announced new sanctions on Iran; the Bank of England maintained interest rates unchanged with an 8-1 vote; the Turkish central bank raised interest rates by 200 basis points in an emergency move; the March LPR remained unchanged for the fifth consecutive month.

Spot Market:

Shanghai: In the morning, market quotes were at premiums of 0~20 yuan/mt against the average price, with fewer quotes against the futures. In the second trading period, general domestic brands were quoted at premiums of 0~20 yuan/mt against the 2504 contract, while silver was quoted at a premium of 20 yuan/mt, Huize at 50 yuan/mt, and the high-priced brand Shuangyan at 60 yuan/mt. The futures market saw a slight decline from the previous day, with some downstream enterprises placing orders at lower prices. Some traders reported improved sales, but overall, spot premiums struggled to rise, remaining basically stable at the previous day's level.

Guangdong: Spot discounts against Shanghai were 40 yuan/mt, with the Shanghai-Guangdong price spread widening. In the first period, suppliers quoted Kirin, Mengzi, Huize, Danxia, and Lanxin at discounts of 10~premiums of 25 yuan/mt. In the second period, Kirin and Lanxin were quoted at premiums of 5~25 yuan/mt. Overall, the futures market saw a slight decline from the previous day, with more inquiries from downstream buyers. However, due to higher market quotes, there was also a wait-and-see sentiment. Traders slightly lowered premiums to facilitate sales. Some end-users bought the dip, and overall trading activity remained relatively active.

Tianjin: Tianjin was quoted at a discount of about 10 yuan/mt against Shanghai. By the close of the morning session, Xinzi was quoted at premiums of 40~50 yuan/mt against the 04 contract, while factory-delivered Xikuan Jinli was quoted at discounts of 0~10 yuan/mt. Bailing delivery was quoted at 60 yuan/mt, and the high-priced brand Zijin was quoted at premiums of 50~80 yuan/mt. Zinc prices continued to pull back, reaching a more acceptable level for downstream buyers. Purchase willingness increased, with some downstream enterprises restocking. Given the limited recent arrivals in the Tianjin area, suppliers stood firm on quotes, leading to an increase in premiums. Overall, market transactions improved compared to the previous day.

Ningbo: Quotes against Shanghai were at premiums of 40 yuan/mt, with the main quotes in Ningbo against the 2504 contract. In the first period, Yongchang was quoted at a premium of 50 yuan/mt, and Kirin at 50~70 yuan/mt. In the second period, trader quotes remained unchanged from the first period. With limited supply in the Ningbo market and few traders selling, downstream zinc alloy factories continued to inquire and purchase, resulting in moderate overall trading. The weak fluctuation in the futures market led traders to further raise spot premiums.

Social Inventory: On March 20, LME zinc inventory decreased by 925 mt to 155,225 mt, a decline of 0.59%. According to SMM, as of March 20, total zinc ingot inventory in seven regions was 131,000 mt, a decrease of 4,900 mt from March 13 and 7,800 mt from March 17, indicating a reduction in domestic inventory.

Zinc Price Forecast: Overnight, LME zinc recorded a four-day winning streak, with the daily candlestick center shifting downward, supported by the 60-day moving average. The market responded to the dovish stance of the US Fed's interest rate meeting, with the US dollar index rising and non-ferrous metals generally pulling back, leading LME zinc to follow suit. Overnight, SHFE zinc recorded a three-day winning streak, but faced pressure from various moving averages. Lower zinc prices prompted increased buying on dips by downstream enterprises, with SMM social inventory decreasing by over 7,000 mt, providing some support to zinc prices.