Against the backdrop of increased supply and weak demand, zinc prices are mainly in the doldrums [SMM Morning Meeting Summary]

June 9 Zinc Morning Meeting Minutes

Futures market: Last Friday, LME zinc opened at $2,689/mt. After a brief dip at the opening, its price center moved above the daily average line, reaching a high of $2,701/mt. During European trading hours, longs reduced positions and exited, causing LME zinc to plunge with its price center shifting downward to fluctuate around $2,665/mt. It finally closed down at $2,662.5/mt, down $25.5/mt (0.95%), with trading volume decreasing to 10,645 lots and open interest dropping by 851 lots to 217,000 lots. Last Friday, the most-traded SHFE zinc 2507 contract opened lower with a gap at 22,275 yuan/mt. As longs reduced positions and exited, SHFE zinc moved weakly around the daily average line within a fluctuation range of less than 100 yuan/mt, finally closing down at 22,225 yuan/mt, down 85 yuan/mt (0.38%), with trading volume decreasing to 69,346 lots and open interest falling by 159 lots to 119,000 lots.

Macro: US nonfarm payrolls in May slightly exceeded expectations; Trump urged Powell to cut interest rates by 100 basis points; Iran's president stated the country is ready to accept nuclear activity inspections at any time; Russia claimed Ukraine postponed prisoner exchange, which Ukraine denied; SSE announced it will push listed companies to further increase dividend payouts; PBOC increased gold reserves for the seventh consecutive month.

Spot market:

Shanghai: Last Friday, more traders in the Shanghai market offered goods, with the nearby-month price spread narrowing significantly. Traders actively lowered spot premiums while offering goods, but downstream enterprises maintained rigid demand, with overall transactions mainly occurring among traders.

Guangdong: Spot discounts of 40 yuan/mt against Shanghai. Overall, many traders in the Guangdong market were offering goods, while futures prices kept rising. With spot premiums remaining at relatively high levels, downstream buying sentiment was weak. Coupled with further contraction in the monthly price spread last week, spot premiums continued to decline.

Tianjin: Tianjin market reported discounts of around 80 yuan/mt against Shanghai. Last Friday, futures prices pulled back, but downstream consumption was poor with weak purchasing sentiment. With ample spot supply in Tianjin and continued contraction in the monthly price spread, traders continuously lowered premiums to sell goods, resulting in poor overall market transactions.

Ningbo: Spot premiums of 60 yuan/mt against Shanghai. As zinc ingot long-term contracts arrived successively, market traders lowered their offers expecting further premium declines. However, downstream enterprises still held certain raw material inventories and showed low purchasing enthusiasm for zinc ingots amid poor orders. Spot transactions in Ningbo last Friday were generally mediocre.

Social inventory: On June 6, LME zinc inventory decreased by 175 mt to 136,975 mt (down 0.13%). According to SMM communication, as of last Thursday (June 5), SMM's zinc ingot inventory across seven regions totaled 79,300 mt, up 4,300 mt from May 29 and 1,900 mt from June 3, showing an increase in domestic inventory.

Zinc Price Forecast: On Friday, LME zinc recorded three consecutive bearish candlesticks, with the 40-day moving average providing support below. The non-farm payrolls data released last Friday exceeded expectations, weakening expectations for US Fed interest rate cuts within the year. The US dollar strengthened, and LME zinc prices declined accordingly. It is expected that zinc prices will maintain a fluctuating trend in the short term. On Friday, SHFE zinc recorded a bearish candlestick, with the daily candlestick's center shifting downward and the KDJ indicator's opening expanding downward. The expected increase in zinc supply on the fundamental side remains unabated, while consumption is in the traditional off-season, resulting in insufficient fundamental support. In the short term, attention should be paid to inventory performance.