Concerns Over Tariff Trade Prospects, LME Zinc Continues to Decline [SMM Morning Meeting Summary]

Futures market: Last Friday, LME zinc opened at $2,895.0/mt, initially fluctuating around the daily average line, reaching a high of $2,902/mt. Subsequently, longs reduced their positions, and LME zinc trended downward, rebounding slightly during the night session before continuing to decline, closing at the day's low of $2,851.5/mt, down $46.5/mt, a 1.60% drop. Trading volume increased to 12,255 lots, while open interest decreased by 2,035 lots to 223,000 lots. Last Friday, the most-traded SHFE zinc 2505 contract opened at 23,730 yuan/mt. Initially, shorts increased their positions, causing SHFE zinc to quickly drop below the daily average line, hitting a low of 23,610 yuan/mt. It then oscillated around 23,630 yuan/mt, eventually closing at 23,620 yuan/mt, down 150 yuan/mt, a 0.63% decline. Trading volume decreased to 73,765 lots, while open interest increased by 4,314 lots to 116,000 lots.

Macro: The US February core PCE price index YoY and MoM both exceeded market expectations. US Fed's Daly: There is a reasonable expectation of two more interest rate cuts in 2025. Trump: Starting a third presidential term is not a joke, and Vance taking over and then stepping aside is one method. Foreign media: Trump will visit Saudi Arabia in May. A 7.9-magnitude earthquake occurred in Myanmar. State Administration for Market Regulation: Legally reviewing the transaction of Changhe Port. State-owned Assets Supervision and Administration Commission: Strategic reorganization of central state-owned enterprises in the automotive sector. Multiple banks raised consumer loan interest rates, generally not less than 3%.

Spot market:

Shanghai: In the morning session, market quotations were at premiums of 0~10 yuan/mt against the average price, with fewer quotations against the futures. In the second trading session, ordinary domestic brands were quoted at discounts of 10~premiums of 10 yuan/mt against the 2504 contract, Baiyin at premiums of 20 yuan/mt against the 2504 contract, Huize at premiums of 60 yuan/mt against the 2504 contract, and high-priced brand Shuangyan at premiums of 60 yuan/mt against the 2504 contract. The morning session saw a slight decline compared to last Thursday, with some downstream companies placing orders, but overall purchasing willingness remained weak on Friday, leading to limited improvement in spot trades and no significant change in spot premiums.

Guangdong: Spot discounts against Shanghai were at 10 yuan/mt, with the Shanghai-Guangdong price spread maintained. In the first session, suppliers quoted Qilin, Mengzi, and Lanzinc at discounts of 35~5 yuan/mt. In the second session, Qilin and Mengzi were quoted at discounts of 25~5 yuan/mt against the net price. Overall, last Friday's market decline led some downstream companies to restock at lower prices, improving spot trades. In the first session, the market oscillated with many downstream inquiries but strong观望 sentiment. In the second session, the market continued to decline, with some downstream restocking. Last Friday's market saw improved trades, with spot premiums and discounts slightly rising.

Tianjin: Tianjin's spot discounts against Shanghai were around 10 yuan/mt. By the midday close, Xinzhi was quoted at premiums of 30~60 yuan/mt against the 04 contract, factory-delivered Xikuang at discounts of 0~40 yuan/mt against the 04 contract, Bailing delivered at 80 yuan/mt against the 05 contract, and high-priced brand Zijin at premiums of 80~100 yuan/mt against the 04 contract. Last Friday, zinc prices fell sharply, with the morning session not reaching downstream acceptance levels, leading to a quiet market. Subsequently, zinc prices continued to decline, with traders actively selling, reaching some downstream psychological levels, and traders' quotations slightly increased. Overall trades improved compared to last Thursday.

Ningbo: Spot premiums against Shanghai were at 40 yuan/mt, with mainstream quotations in Ningbo against the 2504 contract. In the first session, Yongchang was quoted at premiums of 40 yuan/mt against the 2504 contract, Qilin at delivered premiums of 80 yuan/mt against the 2504 contract, Honglu-v at premiums of 40 yuan/mt against the 2504 contract, and Huize at premiums of 60 yuan/mt against the 2504 contract. In the second session, traders' quotations remained unchanged from the previous session. Ningbo market traders passively sold, with spot premiums remaining stable last Friday. Some downstream companies placed orders at lower prices, leading to improved spot trades MoM. Qilin zinc ingots may arrive early this week, with continuous supply expected to keep spot premiums oscillating.

Social inventory: On March 28, LME zinc inventory decreased by 3,175 mt to 141,400 mt, a 2.2% drop. According to SMM, as of March 27, SMM's seven-region zinc ingot inventory totaled 130,000 mt, down 1,000 mt from March 20 but up 1,100 mt from March 24, recording an increase in domestic inventory.

Zinc price forecast: Last Friday, LME zinc recorded a large bearish candlestick, with the 20-day moving average forming resistance. The US Fed maintained its expectation of two interest rate cuts this year, but due to impending equivalent tariffs, market concerns about economic prospects led to a broad decline in non-ferrous metals, with LME zinc falling. Last Friday, SHFE zinc recorded a bearish candlestick, with the 40-day moving average forming resistance. Driven by LME, SHFE zinc declined, while TC continued to rise, and domestic zinc ingot supply remained relatively loose. SHFE zinc is expected to remain oscillatory in the short term.