Expectations of loose fundamentals still exist, with SHFE zinc's center slightly declining [SMM Zinc Morning Comment]

SMM, May 19:

Last Friday, LME zinc opened at $2,726.5/mt. After opening, it briefly touched a high of $2,733/mt before declining all the way below the daily average line to a low of $2,679/mt. During European trading hours, as bulls increased their positions in SHFE zinc, the price center of SHFE zinc edged up slightly and fluctuated considerably around the daily average line. In the tail end of the session, LME zinc declined, eventually closing down at $2,686/mt, down by 40 yuan/mt or 1.47%. Trading volume decreased to 98,763 lots, while open interest increased by 3,392 lots to 228,000 lots. Last Friday, LME zinc recorded a bearish candlestick, with the 60-day moving average acting as resistance above and the 10/20-day moving averages providing support below. On May 16, LME zinc inventory decreased by 975 mt to 164,200 mt, a decline of 0.59%. Trump's tariff policy has introduced new uncertainties, with US inflation expectations hitting a new high while consumer confidence index declined, increasing macro uncertainties and putting LME zinc under pressure to decline.

Last Friday, the most-traded SHFE zinc 2506 contract opened at 22,480 yuan/mt. In the early session, as bulls increased their positions, SHFE zinc rose to a high of 22,565 yuan/mt. Subsequently, as bulls reduced their positions, SHFE zinc fluctuated downward all the way, touching a low of 22,415 yuan/mt. It eventually closed down at 22,425 yuan/mt, down by 75 yuan/mt or 0.33%. Trading volume decreased to 53,048 lots, while open interest decreased by 1,861 lots to 92,485 lots. Last Friday, SHFE zinc recorded a bearish candlestick, with the 40/60-day moving averages acting as resistance above and the 10/20-day moving averages providing support below. On the fundamental side, there are still expectations of a subsequent easing on the supply side. Meanwhile, the recent continuous inflow of imported zinc ingots has provided some supplement to domestic spot cargo. There are no obvious bright spots in downstream consumption, and SHFE zinc lacks sufficient support, causing its price center to decline.