US dollar index weakens, LME zinc center moves upward [SMM Morning Meeting Summary]

Futures Market:

Overnight, LME zinc opened at $2,673/mt, and subsequently fluctuated rangebound along the daily average line, dipping to a low of $3,660.5/mt during the session. During European trading hours, bears reduced their positions, pushing the center of LME zinc above the daily average line. The night session saw LME zinc touch a high of $2,727.5/mt before pulling back slightly at the end of the session, ultimately closing up at $2,724.5/mt, a gain of $52/mt or 1.95%. Trading volume decreased to 81,021 lots, while open interest fell by 6,088 lots to 218,000 lots. Overnight, the most-traded SHFE zinc 2506 contract opened higher with a gap at 22,530 yuan/mt. In early trading, SHFE zinc consolidated along the daily average line, dipping to a low of 22,510 yuan/mt. Subsequently, bears reduced their positions, and SHFE zinc quickly rose to touch a high of 22,675 yuan/mt. Then, as bulls continuously reduced their positions and exited the market, the center of SHFE zinc fell back near the daily average line. It ultimately closed up at 22,590 yuan/mt, a gain of 155 yuan/mt or 0.69%. Trading volume decreased to 50,594 lots, while open interest fell by 2,923 lots to 73,707 lots.

Macro:

US media reports: Israel is preparing to attack Iran's nuclear facilities; Trump: The alternative to not passing the tax bill is a significant tax increase; Iran's Supreme Leader Khamenei: Believes nuclear negotiations with the US will not succeed; Trump officially announces the "Golden Dome" defense plan; EU is considering implementing zero quotas on Russian gas imports; Musk: Commits to remaining as Tesla's CEO for the next five years, with the possibility of Starlink going public in the future; Both the 5-year and 1-year LPR are lowered by 10 basis points; NDRC: Must address "cut-throat competition" and further improve the institutional mechanisms for promoting the development of the private economy; PBOC Governor Pan Gongsheng: Emphasizes the need to implement a moderately accommodative monetary policy to meet the effective financing needs of the real economy; Certificate of deposit products are about to fully enter the "1 era."

Spot Market:

Shanghai: The futures market maintained a fluctuating trend. Downstream enterprises continued to purchase as needed, with trading performance being relatively mediocre. However, the market supply of zinc ingots was limited, and some traders still held a refusal to budge on prices sentiment. Yesterday, Shanghai spot premiums remained stable.

Guangdong: Overall, zinc prices continued to fluctuate in the morning session. Some downstream enterprises procured and restocked yesterday, while trading among traders was relatively active. Yesterday, market transactions improved somewhat. Meanwhile, some brands had fewer arrivals recently. Multiple factors drove Guangdong spot premiums to rise slightly.

Tianjin: The futures market still mainly fluctuated. The downstream market was relatively mediocre, with only a small amount of restocking to meet immediate needs. Overall, downstream consumption fell short of expectations. Traders maintained stable offering prices yesterday, with trading mainly among traders, and overall market transactions were mediocre.

Ningbo: Some downstream enterprises had previously purchased a large amount of imported zinc ingots, possessing a certain level of raw material inventory. Recently, their buying sentiment has been low. With the futures market continuing to fluctuate, some traders have faced difficulties in selling their goods. Spot premiums have struggled to rise, and overall trading performance has been mediocre.

Social inventory: On May 20, LME zinc inventory decreased by 4,075 mt to 156,725 mt, a drop of 2.53%. According to SMM communications, as of Monday (May 19), the total zinc ingot inventory across seven locations tracked by SMM was 83,800 mt, a decrease of 1,700 mt from May 12 and a decrease of 2,500 mt from May 15, indicating a decline in domestic inventory.

Zinc price outlook: Overnight, the LME zinc contract recorded a bullish candlestick, with the 60-day moving average acting as resistance above and the 20-day moving average providing support below. Recently, US Fed officials have made more cautious statements about the economy, while the market is focused on the upcoming talks between the US and Japan. The US dollar has weakened, and overseas inventories continue to decline, supporting the upward movement of the LME zinc price center. Overnight, the SHFE zinc contract also recorded a bullish candlestick, with the 40/60-day moving averages acting as resistance above and the 5/20-day moving averages providing support below. Driven by the LME, the SHFE zinc price center has moved upward somewhat. However, China's zinc concentrate imports in April surged 72.07% YoY, and expectations of a loose supply side remain. It is expected that zinc prices will continue to fluctuate in the short term.