Market continues to focus on trade negotiations, LME zinc maintains fluctuating trend [SMM Zinc Morning Meeting Summary]

Zinc Morning Meeting Summary on June 5

Futures Market: Overnight, LME zinc opened at $2,706/mt. After opening, LME zinc rose steadily, reaching a high of $2,730/mt during the midday session, then pulled back from highs and declined, hitting a low of $2,692/mt near the close. It eventually closed down at $2,704/mt, down $7.5/mt or 0.28%. Trading volume decreased to 9,128 lots, and open interest decreased by 521 lots to 213,000 lots. Overnight, the most-traded SHFE zinc 2507 contract opened at 22,380 yuan/mt. In the early session, SHFE zinc weakened slightly, hitting a low of 22,285 yuan/mt, then slowly rose to oscillate above the daily average line, reaching a high of 22,385 yuan/mt near the close. It eventually closed down at 22,380 yuan/mt, down 40 yuan/mt or 0.18%. Trading volume decreased to 63,797 lots, and open interest decreased by 3,425 lots to 121,000 lots.

Macro: It is rumored that the US-Canada agreement may be reached next week, and EU-US tariff negotiations are progressing in the right direction; the US ADP employment data for May fell far short of expectations, and the service sector contracted for the first time in nearly a year; Trump once again called on Powell to cut interest rates, revealing that Putin would make a significant response to the attack on Russian airports; it is reported that Saudi Arabia intends to push OPEC+ to continue accelerating production increases; the first batch of pilot work for the construction of a new-type power system has been launched; the China Passenger Car Association (CPCA) estimates that wholesale sales of passenger NEVs in May increased by 38% YoY; the Hong Kong Securities and Futures Commission (SFC) is considering introducing virtual asset derivatives trading for professional investors.

Spot Market:

Shanghai: The supply of domestically produced zinc ingots in the market remains limited. Traders' spot quotations continue to float above the average price, with spot premiums remaining high. Downstream buyers are cautious about purchasing due to high prices, and spot transactions remain poor.

Guangdong: It is at a spot discount of 100 yuan/mt against Shanghai. Overall, the center of the futures market rose slightly yesterday. Downstream purchasing enthusiasm waned, and spot transactions were relatively average. Meanwhile, the price spread between futures contracts contracted yesterday, and multiple factors drove premiums and discounts to decline somewhat.

Tianjin: It is at a spot discount of 70 yuan/mt against the SHFE market. The futures market rebounded slightly yesterday. Downstream consumption was poor, and buyers were cautious about purchasing due to high prices, mainly restocking based on rigid demand. Yesterday was the contract rollover day, and traders' spot trades were relatively active, but overall market transactions were poor.

Ningbo: It is at a spot premium of 40 yuan/mt against Shanghai. The futures market continued to oscillate. Some downstream buyers had relatively large raw material inventories and remained low in purchase willingness yesterday. Traders slightly lowered their spot premium quotations, and spot trades remained average.

Social Inventory: On June 4, LME zinc inventory decreased by 1,075 mt to 136,275 mt, a decrease of 0.78%. According to communication with SMM, as of June 3, the total zinc ingot inventory across seven locations tracked by SMM was 77,400 mt, a decrease of 1,400 mt from May 26 and an increase of 2,400 mt from May 29. Domestic inventory recorded an increase.

Zinc price outlook: Overnight, LME zinc recorded a bearish candlestick, with the 10-day moving average providing support below. Although the US ADP employment data fell short of expectations and the US dollar index declined, the market continued to focus on trade negotiations, with persistent concerns over tariffs, causing LME zinc to maintain a fluctuating trend. Overnight, SHFE zinc recorded a doji, with the 40-day moving average providing support below. The macro environment continued to exert pressure on zinc prices, coupled with weakened downstream consumption during the off-season, resulting in insufficient fundamental support for zinc prices. SHFE zinc continued to be in the doldrums.