US manufacturing PMI contracts, while the center of LME zinc prices moves upward [SMM Zinc Morning Meeting Summary]

Zinc Morning Meeting Minutes, June 3

Futures market: Overnight, LME zinc opened at $2,638.5/mt. After briefly stabilizing with fluctuations and touching a low of $2,627/mt, it climbed steadily to reach a high of $2,707/mt near the session close, finally settling at $2,693/mt, up $63.5/mt (2.41%). Trading volume rose to 13,705 lots while open interest fell by 536 lots to 213,000 lots. Overnight, SHFE zinc was suspended due to the Dragon Boat Festival holiday in China.

Macro: Foreign media: Trump urges accelerated negotiations, demands "best offers" from countries by Wednesday; US manufacturing activity contracts for fourth consecutive month in May; US media: Major policy reversal allows Iran low-level uranium enrichment; Second round of Russia-Ukraine talks concludes in Istanbul with partial prisoner exchange agreement but no ceasefire; GDPNow model projects US Q2 GDP growth at 4.6%; Powell warns government must understand potential dollar volatility impact.

Spot market:

Shanghai: Last Friday, futures maintained fluctuating trend. Downstream purchasing as needed continued with weak transactions, but traders refused to budge on prices amid tight supply, keeping spot premiums stable.

Guangdong: Reported spot discounts of 60 yuan/mt against Shanghai. Overall, downstream procurement neared completion last Friday. Coupled with persistently high spot premiums/discounts and price sensitivity, market activity remained sluggish, with spot premiums unchanged from Thursday.

Tianjin: Quoted 10 yuan/mt premium against Shanghai. Futures fluctuated last Friday. Downstream plants mostly suspended operations for the holiday with limited restocking demand. As new long-term contracts took effect, major producers awaited contract execution while traders stabilized offers marginally, resulting in overall poor market transactions.

Ningbo: Quoted 80 yuan/mt premium against Shanghai. Some zinc ingot long-term contracts arrived, but overall supply remained tight. Spot premiums held steady as downstream buyers largely completed procurement, leaving market transactions generally muted.

Social inventory: On June 2, LME zinc inventory dropped by 1,000 mt to 138,150 mt (0.72% decline). Per SMM communication, as of May 29, SMM's seven-region zinc ingot inventory totaled 75,000 mt, down 5,400 mt from May 22 and 3,800 mt from May 26, showing domestic inventory reduction.

Price outlook: Overnight, LME zinc formed a bullish candlestick with expanding KDJ divergence. The US ISM manufacturing PMI contracted for third consecutive month, the US dollar index weakened, and renewed geopolitical tensions boosted safe-haven demand, lifting LME zinc's price center MoM. Overnight, SHFE zinc was suspended during China's Dragon Boat Festival holiday.