LME Inventory Continues to Decline, LME Zinc Fluctuates [SMM Morning Meeting Summary]

Futures: Overnight, LME zinc opened at $2,864.0/mt, reaching the intraday high at the opening. At the beginning of the session, shorts increased their positions, causing LME zinc to plunge and hit a low of $2,826/mt during European trading hours. Subsequently, shorts took profits and exited, leading to a shift in the center of LME zinc prices upward. It finally closed up at $2,853.5/mt, up $2/mt or 0.07%, with trading volume dropping to 10,256 lots and open interest decreasing by 941 lots to 222,000 lots. Overnight, the most-traded SHFE zinc 2505 contract opened at 23,450 yuan/mt. At the beginning of the session, SHFE zinc fluctuated near the daily moving average before plunging to a low of 23,355 yuan/mt. Subsequently, shorts exited, and the center of SHFE zinc prices shifted upward, fluctuating around 23,505 yuan/mt. It finally closed up at 23,505 yuan/mt, up 50 yuan/mt or 0.21%, with trading volume decreasing to 74,722 lots and open interest decreasing by 3,000 lots to 114,000 lots.

Macro: Trump is set to announce reciprocal tariffs in the White House Rose Garden on April 2; US Fed's Williams: The current economy is not experiencing stagflation; Iran issues a warning against Trump's threats; Qiushi publishes Xi Jinping's important article "Striving Towards the Grand Goal of Building a Strong Country in Science and Technology"; NBS: March PMI at 50.5%; Ministry of Finance announces arrangements for Q2 2025 government bond issuance; PBOC conducted 800 billion yuan in outright reverse repo operations in March.

Spot market:

Shanghai: In the morning session, market quotations were at premiums of 10~20 yuan/mt against the average price, with fewer quotations against the futures. In the second trading session, ordinary domestic brands were quoted at premiums of 10~20 yuan/mt against the 2504 contract, Baiyin at premiums of 30 yuan/mt against the 2504 contract, Huize at premiums of 100 yuan/mt against the 2505 contract, and the premium brand Shuangyan at premiums of 100 yuan/mt against the 2504 contract. In the morning session, futures continued to decline, with the near-month contract turning into a backwardation structure. Downstream enterprises took advantage of the low prices to make purchases, with strong buying sentiment. Spot trades improved MoM, and the market atmosphere was active yesterday, driving a slight increase in spot premiums today.

Guangdong: Spot discounts of 30 yuan/mt against Shanghai, with the Shanghai-Guangdong price spread widening. In the first session, suppliers quoted Qilin, Mengzi, Feilong, and Lanzinc at premiums of 5~25 yuan/mt. In the second session, Qilin and Mengzi were quoted at premiums of 20~25 yuan/mt against the net price. Overall, yesterday's futures decline led to increased restocking by downstream enterprises, improving spot trades. Downstream enterprises made purchases at lower prices. The price decline and improved trades led to a slight increase in premiums by traders, with spot premiums and discounts rising.

Tianjin: Tianjin market reported discounts of around 10 yuan/mt against Shanghai. By the midday close, Xinzhi was quoted at premiums of around 50 yuan/mt against the 04 contract, factory-delivered Xikuang at discounts of 0~20 yuan/mt against the 04 contract, Chihong at premiums of around 50 yuan/mt against the 04 contract, and the premium brand Zijin at premiums of around 100 yuan/mt against the 04 contract. Yesterday, zinc prices fell significantly, with downstream procurement enthusiasm high and active inquiries. Many enterprises restocked at lower prices, but smelters and traders were reluctant to sell, coupled with limited spot supply, leading to a slight increase in premiums. Overall trades improved.

Ningbo: Spot premiums of 50 yuan/mt against Shanghai, with mainstream quotations in Ningbo against the 2504 contract. In the first session, Yongchang was quoted at premiums of 60 yuan/mt against the 2504 contract, Qilin at premiums of 50~60 yuan/mt against the 2504 contract, and Honglu-v at premiums of 60 yuan/mt against the 2504 contract. In the second session, traders' quotations remained unchanged from the previous session. Yesterday, few traders in Ningbo sold, with futures declining significantly. Traders stood firm on spot premiums, and downstream enterprises made purchases at lower prices. Spot trades performed well, with attention on subsequent zinc ingot arrivals in Ningbo.

Social inventory: On March 31, LME zinc inventory decreased by 3,200 mt to 138,200 mt, down 2.26%. According to SMM communication, as of Monday, March 31, SMM's seven-region zinc ingot inventory totaled 125,900 mt, down 3,000 mt from March 24 and 4,100 mt from March 27, with domestic inventory recording a decrease.

Zinc price forecast: Overnight, LME zinc recorded a long lower shadow candlestick. US Fed officials denied stagflation, and the market is still digesting the impending implementation of reciprocal tariffs, raising concerns about the economic outlook. However, continued declines in LME inventory provided support for LME zinc, which fluctuated. Overnight, SHFE zinc recorded a small bullish candlestick. According to SMM, April refined zinc production slightly exceeded expectations, with domestic zinc ingot supply relatively loose. However, social inventory recorded a decrease, and domestic consumption remained resilient. The center of SHFE zinc prices shifted upward, and the market is still awaiting the BM result. SHFE zinc is expected to remain volatile in the short term.