PMI data rebounds strongly, LME zinc records a bullish candlestick [SMM Morning Meeting Summary]

Futures Market:

Overnight, LME zinc opened at $2,683/mt. In the early session, LME zinc fluctuated considerably along the daily average line, dipping to a low of $2,669/mt during European trading hours. Entering the night session, LME zinc rapidly rose above the daily average line, hitting a high of $2,707.5/mt. Subsequently, LME zinc fluctuated rangebound around the center of $2,700/mt, closing up at $2,704.5/mt, up $20/mt or 0.75%. Trading volume decreased to 80,249 lots, while open interest fell by 866 lots to 212,000 lots. Overnight, the most-traded SHFE zinc 2507 contract opened at 22,295 yuan/mt. In the early session, with bulls increasing their positions, SHFE zinc rapidly rose, hitting a high of 22,375 yuan/mt. Subsequently, SHFE zinc plunged below the daily average line, dipping to a low of 22,250 yuan/mt. SHFE zinc then slightly rose, closing up at 22,300 yuan/mt, up 55 yuan/mt or 0.25%. Trading volume decreased to 52,040 lots, while open interest increased by 1,141 lots to 109,000 lots.

Macro:

Trump's tax reform bill narrowly passed the House of Representatives; Fed Governor Waller: If tariffs decline, the Fed is expected to cut interest rates in the second half of 2025; White House: Trump made it clear to Netanyahu that he hopes to reach an agreement with Iran; Iran responds: Any Israeli attack on Iran's nuclear facilities will be seen as US involvement, and it has the capability but no intention to develop nuclear weapons; OPEC+ is discussing increasing production by 411,000 barrels per day again in July; Trump takes action against Harvard University; CSRC: Stronger support for the listing of high-quality unprofitable technology companies; National Financial Regulatory Administration: The third batch of long-term investment reform pilots for insurance funds will be approved soon, with a scale of 60 billion yuan.

Spot Market:

Shanghai: The arrival of imported zinc ingots continues to supplement zinc ingot supply. Traders continue to refuse to budge on prices, with spot premiums holding steady. Downstream enterprises' inquiry sentiment remains low, and spot trades are sluggish.

Guangdong: Currently, some brands in the Guangdong market have limited spot supply, and traders are less willing to lower premiums to sell. Although the futures market declined yesterday, some downstream enterprises had already made small purchases the day before, with weak stocking demand. The market trading atmosphere has weakened.

Tianjin: The futures market is mainly fluctuating, with downstream enterprises remaining relatively quiet and having low restocking sentiment. Traders' selling quotes held steady yesterday, with trading mainly among traders. Overall market transactions are average.

Ningbo: The supply of domestically produced zinc ingots in Ningbo is limited. Yesterday, traders' spot premium quotes in the market remained high. Some downstream enterprises had already purchased certain inventories the day before, and spot transactions remained average yesterday.

Social Inventory: On May 22, LME zinc inventory decreased by 1,650 mt to 156,225 mt, a decline of 1.05%. According to SMM communications, as of Thursday (May 22), the total zinc ingot inventory across seven locations tracked by SMM was 80,400 mt, a decrease of 5,900 mt from May 15 and a decrease of 3,400 mt from May 19. Domestic inventory recorded a decline.

Zinc Price Forecast: Overnight, the LME zinc contract recorded a bullish candlestick. The 60-day moving average above exerted pressure, while the 20-day moving average below provided support. Trump's tax reform bill narrowly passed the House of Representatives. Influenced by the expected increase in the fiscal deficit outlined in the bill, market concerns gradually arose. Meanwhile, PMI data that exceeded expectations somewhat restored market sentiment, causing the center of LME zinc prices to rise. Overnight, the SHFE zinc contract also recorded a bullish candlestick, with the 40/60-day moving averages above exerting pressure and the middle Bollinger Band below providing support. On the fundamental side, the entry of Russia's OZ mine into the domestic market has sustained expectations of a loose supply side. Downstream consumption sectors have shown mixed performances, with only a small-scale recovery observed in export orders currently. It is expected that SHFE zinc will continue to oscillate in the short term.