LME zinc continues to weaken, with attention on macro guidance [SMM Zinc Morning Meeting Summary]

June 6 Zinc Morning Meeting Summary

Futures Market: Overnight, LME zinc opened at $2,701/mt. After the opening, it rose to a high of $2,710.5/mt, then fluctuated downward, hitting a low of $2,680/mt near the night session. Subsequently, LME zinc rebounded again but failed to break higher and fluctuated considerably around the daily average, finally closing down at $2,688/mt, a decrease of $16/mt or 0.59%. Trading volume increased to 11,407 lots, and open interest rose by 5,246 lots to 218,000 lots. Overnight, the most-traded SHFE zinc 2507 contract opened at 22,290 yuan/mt. At the beginning of the session, SHFE zinc fell to 22,230 yuan/mt, then recovered from the low before declining again. It then moved up to a high of 22,355 yuan/mt, followed by a narrow rangebound fluctuation around the daily average, finally closing down at 22,285 yuan/mt, a decrease of 55 yuan/mt or 0.25%. Trading volume increased to 86,501 lots, and open interest decreased by 2,248 lots to 122,000 lots.

Macro: Trump and Musk engaged in intense exchanges, causing Tesla's market value to drop by $150 billion; US initial jobless claims surged to an 8-month high; The European Central Bank cut interest rates by 25 basis points, with Lagarde hinting that the rate-cut cycle may end; Trump hinted at potential sanctions on both Russia and Ukraine; Xi Jinping spoke on the phone with US President Trump; PBOC will conduct 1,000 billion yuan in reverse repo operations today; Ministry of Commerce: China will approve compliant rare earth export license applications

Spot Market:

Shanghai: With the narrowing of the near-term price spread, Shanghai spot premiums were adjusted lower yesterday. However, downstream players continued to observe, and under just-in-time procurement, trading remained sluggish, mainly among traders.

Guangdong: Guangdong spot discounts against Shanghai were 80 yuan/mt. Overall, the futures market continued to fluctuate, with many traders selling. However, due to weak downstream consumption, market purchasing enthusiasm was insufficient. Additionally, the monthly price spread contracted further, leading to a continued decline in spot premiums and discounts.

Tianjin: Tianjin spot discounts against Shanghai were 90 yuan/mt. The futures market continued to rebound yesterday, but downstream consumption was poor, and restocking sentiment was weak. Traders continuously lowered premiums to sell, resulting in poor overall market transactions.

Ningbo: Ningbo spot premiums against Shanghai were 60 yuan/mt. As Qilin zinc ingots gradually replenished and imported zinc ingots continued to flow in, downstream players had low willingness to purchase at higher premiums, expecting a decline. Traders actively reduced spot quotes to sell, but spot trading remained sluggish.

Social Inventory: On June 5, LME zinc inventory increased by 875 mt to 137,150 mt, a rise of 0.64%. According to SMM, as of June 5, the total zinc ingot inventory in seven regions was 79,300 mt, an increase of 4,300 mt from May 29 and 1,900 mt from June 3, indicating an increase in domestic inventory.

Zinc Price Forecast: Overnight, the LME zinc contract recorded a bearish candlestick, with the middle band of the Bollinger Bands providing support. The market continued to closely monitor the progress of trade negotiations, as uncertainties surrounding tariffs persisted, keeping LME zinc in the doldrums, with its center of gravity edging slightly lower again. Overnight, the SHFE zinc contract also recorded a bearish candlestick, with the 5-day moving average acting as resistance. In recent times, imported zinc ingots have continued to flow into the domestic market. Coupled with the expected significant increase in zinc ingot production in June, supply pressures persist. Additionally, the downstream sector has entered the off-season for consumption, keeping the SHFE zinc night session in the doldrums.