Macro sentiment improves, but fundamental support is insufficient; zinc prices maintain sideways movement [SMM Morning Meeting Summary]

Zinc Morning Meeting Summary on May 13

Futures Market: Overnight, LME zinc opened at $2,668/mt. After briefly dipping to $2,644.5/mt at the start of the session, bulls increased their positions, driving LME zinc to fluctuate upward throughout the night session, reaching a high of $2,717.5/mt. Subsequently, bulls took profits and exited the market, causing LME zinc to drop back slightly, closing at $2,669/mt, up $13.5/mt or 0.51%. Trading volume increased to 12,942 lots, while open interest rose by 1,652 lots to 218,000 lots. Overnight, the most-traded SHFE zinc 2506 contract opened at 22,530 yuan/mt. It quickly surged to 22,655 yuan/mt at the start of the session, but then bulls reduced their positions, causing SHFE zinc to fluctuate downward, with the center moving down to around 22,310 yuan/mt. It eventually closed at 22,300 yuan/mt, down 25 yuan/mt or 0.11%. Trading volume decreased to 75,285 lots, while open interest fell by 3,194 lots to 115,000 lots.

Macro: Trump's "Grand Tax Cut Bill" was announced; US Treasury Secretary stated that they would study how to address non-tariff barriers; Federal Reserve Governor Kugler supported maintaining interest rates at their current levels; Zelenskyy approved a US-Ukraine mineral agreement and expressed willingness to hold direct talks with Putin in Turkey; a joint statement was issued following the China-US Geneva Economic and Trade Talks; China launched a special campaign to combat the smuggling and export of strategic minerals; CK Hutchison issued a statement in response to the port transaction.

Spot Market:

Shanghai: In the morning session, the market quoted premiums of 90-120 yuan/mt against the average price, with no quotes against the futures market. In the second trading session, regular domestic zinc was quoted at premiums of 520-530 yuan/mt against the 2506 contract, Baiyin at a premium of 450 yuan/mt against the 2506 contract, Honglu-v at a premium of 480 yuan/mt against the 2506 contract, Huize at a premium of 650 yuan/mt against the 2506 contract, and the high-end brand Shuangyan was also quoted at a premium of 650 yuan/mt against the 2506 contract. Imported zinc ingots continued to flow into the domestic market, supplementing zinc ingot supply. The futures market fluctuated continuously in the morning session. Some downstream enterprises that had pre-ordered imported zinc ingots showed low buying sentiment yesterday. Domestic traders faced difficulties in selling their goods, and spot premiums continued to weaken.

Guangdong: It was on par with Shanghai spot prices, and the Shanghai-Guangdong price spread remained stable. In the first instance, suppliers quoted premiums of 430-460 yuan/mt against the online price for Qilin, Mengzi, Feilong, and Lanxin brands. In the second session, Qilin, Mengzi, and Lanxin were quoted at premiums of 430-450 yuan/mt against the online price. Overall, affected by the seasonal off-season in consumption, current procurement by downstream enterprises in Guangdong was mainly for just-in-time needs, and traders continuously lowered premiums to facilitate sales. Amid weak market transactions, spot premiums and discounts in Guangdong continued to decline yesterday.

Tianjin: Tianjin prices were quoted at discounts of around 30 yuan/mt against Shanghai prices. By the close of the morning session, Xikuang was quoted at premiums of 360-370 yuan/mt for delivery against the 06 contract, Chihong at around 400 yuan/mt against the 06 contract, Hongye at 470 yuan/mt against the 06 contract, Bailing at 450 yuan/mt against the 06 contract, and the high-end brand Zijin was quoted at premiums of 520-550 yuan/mt against the 06 contract.The futures market experienced sideways movement, with downstream traders holding a bearish sentiment towards premiums, primarily engaging in restocking to meet immediate needs. Traders continuously lowered premiums to facilitate sales, leading to a decline in premiums across all brands. Overall market transactions were sluggish.

Ningbo: Premiums for spot cargo quotes against Shanghai were 20 yuan/mt. The mainstream quotes in the Ningbo region were against the 2506 contract. In the first session, Yongchang quoted premiums of 480 yuan/mt against the 2506 contract, Qilin quoted premiums of 450-480 yuan/mt against the 2506 contract, Huize quoted premiums of 680 yuan/mt against the 2506 contract, and SMC quoted an average price delivered on par with the contract. In the second session, SMC slightly raised its premiums, while other traders maintained their quotes from the previous session. Recently, imported zinc ingots arrived in the Ningbo market, and low-priced sales impacted domestic spot transactions. Traders voluntarily lowered yesterday's spot premiums to facilitate sales, but downstream demand remained focused on immediate needs, resulting in average transaction performance for domestic zinc ingots.

Social Inventory: On May 12, LME zinc inventory decreased by 475 mt to 169,850 mt, a decline of 0.28%. According to communication with SMM, as of May 12, the total zinc ingot inventory across seven locations tracked by SMM was 85,500 mt, an increase of 1,400 mt from May 6 and 2,200 mt from May 8, indicating a rise in domestic inventory.

Zinc Price Forecast: Overnight, LME zinc recorded a long upper shadow bullish candlestick, with the 40-day moving average acting as resistance. Significant progress was made in China-US trade negotiations, leading to a rise in global stock markets and an improvement in market sentiment, which drove LME zinc prices higher. Overnight, SHFE zinc recorded a long upper shadow bearish candlestick, with the 5-day moving average providing support. Although the China-US Geneva economic and trade talks reached an agreement on tariff reductions overnight, improving market sentiment, traders remained cautious in their overall trading. Additionally, on the fundamentals side, with the supplement of imported zinc ingots, social inventory increased, weakening fundamental support, and zinc prices maintained sideways movement.