March Composite PMI Improvement Boosts US Dollar LME Zinc Records an Inverted V Reversal [SMM Morning Meeting Summary]

Futures: Overnight, LME zinc opened at $2,932/mt. At the beginning of the session, the center of LME zinc fluctuated around the daily average line. During European trading hours, LME zinc rose to a high of $2,976/mt. Subsequently, with longs reducing positions, LME zinc plunged during the night session, attempting to rise but being resisted by the daily average line and ultimately pulling back. It closed at $2,938.5/mt, up $11/mt or 0.38%, with trading volume decreasing to 64,114 lots and open interest falling by 451 lots to 224,000 lots. Overnight, the most-traded SHFE zinc 2505 contract opened at 24,270 yuan/mt. After opening, SHFE zinc quickly rose to 24,280 yuan/mt. Then, with longs reducing positions, it fell below the daily average line to a low of 24,080 yuan/mt. Subsequently, bulls and bears engaged in a tug-of-war, with the center of SHFE zinc fluctuating around 24,110 yuan/mt. It closed at 24,110 yuan/mt, down 90 yuan/mt or 0.37%, with trading volume decreasing to 64,465 lots and open interest falling by 2,179 lots to 131,000 lots.

Macro: Trump: Will impose a second round of tariffs on Venezuela; White House sources: US-Russia talks went smoothly, positive news to be announced; Fed's Bostic believes there will only be one interest rate cut this year; Sources: OPEC+ plans to increase production for the second time in May; PBOC: MLF operations will be conducted using a fixed quantity, interest rate bidding, and multiple price winning method; Ministry of Finance: Fiscal policy in 2025 will be more proactive; China-EU discussions on sending peacekeeping forces to Ukraine? Foreign Ministry: The report is completely inaccurate.

Spot Market:

Shanghai: In the morning session, market quotes were at premiums of 0~10 yuan/mt against the average price, with fewer quotes against the futures. In the second trading period, ordinary domestic brands were quoted at discounts of 10~premiums of 10 yuan/mt against the 2504 contract, while silver was quoted at a premium of 10 yuan/mt against the 2504 contract, Huize at a premium of 40 yuan/mt, and the high-priced brand Shuangyan at premiums of 40-50 yuan/mt against the 2504 contract. After the market opened, zinc prices rose significantly, dampening buying sentiment. Some traders lowered their spot quotes to facilitate sales. Shanghai spot premiums decreased MoM, with enterprises continuing to purchase based on rigid demand, resulting in moderate overall spot transactions.

Guangdong: Spot prices were on par with Shanghai, with the Shanghai-Guangdong price spread narrowing. In the first period, suppliers quoted Kirin, Mengzi, Huize, Feilong, and Lanxin at discounts of 35~5 yuan/mt. In the second period, Kirin and Mengzi were quoted at discounts of 15~10 yuan/mt against the online price. Overall, as zinc prices continued to rise, downstream buyers were cautious despite some inquiries. End-users with inventory replenishment plans were hesitant, leading to suppressed purchasing enthusiasm. The overall market transactions were weak, with difficult-to-sell spot goods causing premiums and discounts to decline.

Tianjin: Tianjin prices were on par with Shanghai. By the end of the morning session, Xinzi was quoted at a premium of 50 yuan/mt against the 04 contract, while factory-delivered Xinkuang Jili was quoted at discounts of 0~20 yuan/mt. Bailin delivered was quoted at 60 yuan/mt against the 05 contract, and the high-priced brand Zijin was quoted at premiums of 80~100 yuan/mt against the 04 contract. With zinc prices rising, downstream buying sentiment was poor, and most took a wait-and-see attitude. Additionally, due to limited arrivals in Tianjin, self-pick-up prices from warehouses were firm and slightly increased. Factory-delivered zinc ingot prices remained stable, and the price difference between warehouse self-pick-up and factory delivery remained large, leading to poor overall transactions.

Ningbo: Spot prices were at a premium of 50 yuan/mt against Shanghai, with the main quotes in Ningbo against the 2504 contract. In the first period, Kirin was quoted at premiums of 50-60 yuan/mt against the 2504 contract, while silver was quoted at premiums of 40-50 yuan/mt, and Kazakhstan Kirin at a discount of 30 yuan/mt. In the second period, trader quotes remained unchanged from the previous period. Kirin and other zinc ingots had not yet arrived, and the supply in the Ningbo market was still limited. Traders' quotes were firm, and although the morning session saw a significant rise, downstream rigid demand persisted, keeping overall spot premiums stable.

Social Inventory: On March 24, LME zinc inventory decreased by 750 mt to 153,650 mt, a decline of 0.49%. According to SMM, as of March 24, the total zinc ingot inventory in seven regions was 128,900 mt, a decrease of 9,900 mt from March 17 and 2,100 mt from March 20, indicating a reduction in domestic inventory.

Zinc Price Forecast: Overnight, LME zinc recorded a bullish candlestick, with the lower Bollinger Band providing resistance and the 20/60-day moving averages offering support. The US March S&P Global Composite PMI preliminary reading exceeded expectations, and the US dollar index's rise put pressure on LME zinc, causing it to pull back. Overnight, SHFE zinc recorded a bearish candlestick, with the upper Bollinger Band providing resistance and various moving averages offering support. Although domestic social inventory slightly decreased, SHFE zinc also weakened under external influence. The Ministry of Finance recently stated that fiscal policy in 2025 will be more proactive, which is expected to provide some support to zinc prices.