Inflow of imported ore supports expectations of loose supply, with SHFE zinc expected to remain volatile in the short term [SMM Zinc Morning Comment]

SMM, May 23:

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 quickly rose above the daily average line, hitting a high of $2,707.5/mt. Subsequently, the price center of LME zinc fluctuated rangebound around $2,700/mt, eventually closing up at $2,704.5/mt, a gain of $20/mt or 0.75%. Trading volume decreased to 80,249 lots, while open interest fell by 866 lots to 212,000 lots. Overnight, LME zinc recorded a bullish candlestick. The 60-day moving average above exerted pressure, while the 20-day moving average below provided support. Overnight, LME zinc inventory decreased by 1,650 mt to 156,225 mt, a decline of 1.05%. 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 emerged. Meanwhile, PMI data that exceeded expectations somewhat restored market sentiment, causing the price center of LME zinc to rise.

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 quickly 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, eventually closing up at 22,300 yuan/mt, a gain of 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. Overnight, SHFE zinc recorded a bullish candlestick. The 40/60-day moving averages above exerted pressure, while the middle Bollinger Band below provided support. On the fundamental side, the entry of Russia's OZ mine into China continues to fuel expectations of a loose supply side. Downstream consumption sectors have shown mixed performances, with only a small-scale recovery observed in export orders. It is expected that SHFE zinc will continue to fluctuate in the short term.