Both macro and fundamental factors are weak, with the center of zinc price moving downward [SMM Morning Meeting Summary]

Summary of Zinc Morning Meeting on May 16

Futures Market: Overnight, LME zinc opened at $2,760/mt. In the early session, a tug-of-war between longs and shorts saw LME zinc oscillate around the daily average line. During European trading hours, bears took the upper hand, pushing the center of LME zinc down to $2,715/mt. Entering the night session, it rebounded near the daily average line, ultimately closing down at $2,726/mt, down $35.5/mt or 1.29%. Trading volume decreased to 12,734 lots, while open interest increased by 1,548 lots to 225,000 lots. Overnight, the most-traded SHFE zinc 2506 contract opened lower with a gap at 22,490 yuan/mt. After dipping to 22,440 yuan/mt in the early session, bears took profits and exited, pushing SHFE zinc higher with the center moving up to 22,575 yuan/mt. It ultimately closed up at 22,595 yuan/mt, up 145 yuan/mt or 0.64%. Trading volume decreased to 57,656 lots, while open interest decreased by 2,645 lots to 96,405 lots.

Macro: US retail sales in April slowed significantly and PPI unexpectedly declined as policies such as tariffs began to curb demand. Trump said the US was close to reaching a nuclear deal with Iran. Putin refused to meet Zelensky, and peace talks in Turkey are unlikely to break the deadlock. Chinese Premier: Place the strategic foothold of development on strengthening the domestic circulation to hedge against uncertainties in the international circulation.

Spot Market:

Shanghai: The futures market maintained highs. Downstream inquiries and bargaining were scarce, and trading activity was sluggish. Traders continued to lower spot premiums to facilitate shipments, but downstream enterprises maintained just-in-time purchases, resulting in overall weak trading activity.

Guangdong: Overall, the center of the futures market moved higher yesterday, coupled with still relatively high premiums and discounts, leading to the emergence of fear of high prices among downstream buyers. In the morning session, traders faced difficulties in selling, prompting them to continuously lower premiums and discounts. In the second session, trading activity slightly picked up. The upward movement of zinc prices, coupled with sluggish spot trading, drove spot premiums and discounts lower.

Tianjin: The futures market continued to rise slightly yesterday. Downstream enterprises were cautious in purchasing due to fear of high prices, conducting only small-scale just-in-time restocking with few inquiries. Traders continued to lower premiums to facilitate shipments, resulting in overall poor market trading activity.

Ningbo: The impact of low-priced imports persisted. Domestic traders significantly lowered their spot premium quotes yesterday. However, some downstream enterprises had previously purchased a large amount of imported zinc ingots, maintaining a certain level of raw material inventory. Overall trading activity remained just-in-time.

Social Inventory: On May 15, LME zinc inventory decreased by 1,875 mt to 165,175 mt, a drop of 1.12%. According to SMM communications, as of May 15, the total zinc ingot inventory across seven locations tracked by SMM was 86,300 mt, an increase of 3,000 mt from May 8 and 800 mt from May 12, indicating a rise in domestic inventory.

Zinc Price Outlook: Overnight, LME zinc stopped rising and started to fall, with the 60-day moving average acting as resistance and the 40-day moving average providing support. The growth rate of US retail sales slowed down in April, and the month-on-month PPI rate unexpectedly declined. Weak economic data led to a fading of the earlier optimism due to the easing of trade tariffs, providing an opportunity for bears to enter the market. LME zinc was in the doldrums. Overnight, SHFE zinc recorded a small bullish candlestick, yet the center of the daily candlestick shifted downward, and the KDJ indicator's opening narrowed. Due to the influx of imported zinc ingots, as well as the impact of high zinc prices and the off-season, downstream buyers were cautious about purchasing at elevated levels, leading to an accumulation of social inventory. Meanwhile, as some smelters approached the end of their maintenance periods, the expected increase in supply was on the rise, causing zinc prices to jump initially and then pull back.