Macro sentiment has not improved, LME zinc continues to decline [[SMM Zinc Morning Meeting Summary]]

Zinc Morning Meeting Summary on May 8

Futures Market: Overnight, LME zinc opened at $2,638/mt. Initially, it rose to a high of $2,658/mt before quickly pulling back and entering a fluctuating trend. During the mid-session, LME zinc rebounded above the daily average line but slipped again near the close, hitting a low of $2,613/mt. It eventually closed at $2,613/mt, down $13.5/mt or 0.51%. Trading volume decreased to 10,498 lots, while open interest increased by 2,309 lots to 211,000 lots. Overnight, the most-traded SHFE zinc 2506 contract opened at 22,245 yuan/mt. It quickly surged to a high of 22,455 yuan/mt at the start of trading before gradually retreating from the highs. During the night session, it hit a low of 22,210 yuan/mt and then maintained a fluctuating trend. It eventually closed at 22,240 yuan/mt, up 30 yuan/mt or 0.14%. Trading volume decreased to 80,117 lots, while open interest increased by 5,163 lots to 122,000 lots.

Macro: The US Fed kept interest rates unchanged for the third consecutive time; Sources: The Trump administration plans to lift Biden-era restrictions on AI chips; India: If Pakistan responds to the attack, India will also respond; European Commission: Will announce preparations for the next steps in retaliatory measures against US tariffs on Thursday; Ministry of Foreign Affairs: The talks were held at the request of the US side; PBOC increased gold reserves for the sixth consecutive month; CSRC issued the "Action Plan for Promoting High-Quality Development of Public Funds"; 1.92 million new A-share accounts were opened in April, up 31% YoY.

Spot Market:

Shanghai: With fewer traders offering cargoes in the market and weak supply, spot premiums in Shanghai continued to rise. However, downstream companies had built up certain inventories through stockpiling earlier, and the futures market maintained a fluctuating trend. Enterprises showed low buying sentiment and inquiries, resulting in poor overall trading performance in the market.

Guangdong: It was at a premium of 0 yuan/mt against Shanghai spot cargoes. Overall, premiums and discounts in the market and the price spread between futures contracts have gradually increased recently. Downstream companies restocked the day before yesterday, and the market sentiment was cautious, with buying sentiment weakening. Traders' cargo offerings were poor. However, the widening price spread between futures contracts led to a slight increase in spot premiums and discounts.

Tianjin: Tianjin was at a discount of about 10 yuan/mt against the Shanghai market. The futures market was in the doldrums, but the price spread between futures contracts gradually widened. Some downstream companies adopted a wait-and-see attitude, expecting premiums to fall, and focused on just-in-time restocking or waiting for new long-term contracts to arrive. Coupled with weak orders, their procurement enthusiasm was low. Traders' cargo offering prices remained slightly stable, and overall trading was average.

Ningbo: It was at a premium of 50 yuan/mt against Shanghai spot cargoes. As the price spread between nearby months widened, traders in the market continued to raise their spot premium quotes. However, some downstream companies in Ningbo were not short of raw materials, and enterprises showed low buying sentiment, basically maintaining just-in-time procurement. Overall, spot trading performance deteriorated.

Social inventory: On May 7, LME zinc inventory decreased by 1,525 mt to 171,400 mt, a decline of 0.88%. According to communication with SMM, as of May 6, the total zinc ingot inventory across seven locations tracked by SMM was 84,100 mt, a decrease of 1,800 mt from April 28 and an increase of 7,100 mt from April 30. Domestic inventory recorded an increase.

Zinc price outlook: Overnight, LME zinc recorded a bearish candlestick, with the upper Bollinger Band forming resistance. The market maintained a cautious stance on the international trade situation, with no significant improvement in macro sentiment. Additionally, the US dollar index continued to strengthen, exerting downward pressure on LME zinc. Overnight, SHFE zinc recorded a long upper shadow bearish candlestick, with the 10-day moving average forming resistance above. With the inflow and replenishment of imported zinc ingots, the market's expectation of loose zinc ingot supply persisted, while consumption performance was mediocre, providing insufficient fundamental support for zinc prices. SHFE zinc maintained a fluctuating trend.