Tensions escalate in the Middle East, LME zinc records a long lower shadow bearish candlestick [SMM Morning Meeting Summary]

Futures Market:

Last Friday, LME zinc opened at $2,642.5/mt. In the early session, LME zinc fluctuated along the daily average line, reaching a high of $2,649.5/mt. During the European trading session, LME zinc declined to a low of $25,882/mt. In the night session, LME zinc continued to rise above the daily average line, with the price center fluctuating rangebound around $2,625/mt near the close. It eventually closed at $2,626.5/mt, down $17.5/mt or 0.66%. Trading volume increased to 144,000 lots, while open interest decreased by 236 lots to 206,000 lots. Last Friday, the most-traded SHFE zinc 2507 contract opened at 21,745 yuan/mt. In the early session, bears increased their positions, pushing SHFE zinc below the daily average line to a low of 21,660 yuan/mt. Subsequently, bears reduced their positions and exited, causing SHFE zinc to fluctuate upward above the daily average line. It reached a high of 21,895 yuan/mt near the close, eventually closing at 21,895 yuan/mt, up 80 yuan/mt or 0.87%. Trading volume decreased to 78,378 lots, while open interest decreased by 2,631 lots to 121,000 lots.

Macro:

Trump: The US may still intervene in the Israel-Iran conflict. Senior US official: Israel had an opportunity to eliminate Iran's Supreme Leader Khamenei over the weekend. Netanyahu: Israel is willing to halt operations if Iran abandons its nuclear program. Netanyahu: Intelligence shows Iran had planned to assassinate Trump. Japanese media: The Bank of Japan will discuss the extent of bond-buying reduction. The White House has initiated a review of SpaceX's contracts. PBOC: M2 grew 7.9% YoY and M1 grew 2.3% YoY at the end of May.

Spot:

Shanghai: Low-priced imported zinc ingots continued to impact domestic transactions. Last Friday, spot premiums offered by market traders continued to decline, with some traders taking advantage of the situation to sell off their inventory. The premium of domestic zinc over the average price fell to around 20/30 yuan/mt. However, with the futures market fluctuating, downstream enterprises maintained their just-in-time demand, and transactions remained generally lackluster. Overall, trading was mainly among traders. It is expected that after the delivery is completed this week, premiums may continue to decline.

Guangdong: Overall, the futures market fluctuated considerably last Friday. Downstream enterprises had restocked significantly earlier, and the current actual demand from end-users was average. Spot transactions in the market were relatively ordinary, with spot premiums and discounts slightly declining.

Tianjin: The futures market continued to fluctuate, with weak downstream consumption. Downstream enterprises had restocked significantly earlier and mainly focused on just-in-time restocking. Many traders had delivery plans, and premiums remained stable. Trading was mainly among traders, with overall market transactions being weak.

Ningbo: Recently, a large amount of Qilin zinc ingots arrived, and some traders lowered their premium quotes to expedite sales. Spot premiums in Ningbo continued to decline, with the futures market maintaining a fluctuating trend. Although some downstream enterprises restocked for the weekend, overall demand remained just-in-time, and transactions were generally lackluster.

Social inventory: On June 13, LME zinc inventory decreased by 1,025 mt to 131,000 mt, a decline of 0.78%. According to SMM communications, as of Thursday (June 12) this week, the total zinc ingot inventory across seven locations tracked by SMM was 77,100 mt, a decrease of 2,200 mt from June 5 and a decrease of 4,600 mt from June 9, indicating a reduction in domestic inventory.

Zinc price outlook: Last Friday, the LME zinc contract recorded a long lower shadow bearish candlestick, with the 10/60-day moving averages acting as resistance above. Affected by the escalation of geopolitical tensions in the Middle East due to Israel's attack on Iran, market risk aversion sentiment was strong, and the LME zinc contract recorded a "V"-shaped reversal. Last Friday, the most-traded SHFE zinc contract recorded a bald bullish candlestick, with various moving averages acting as resistance above. From a fundamental perspective, with the recent arrival of imported zinc ingots, there is still an expectation of loose supply in the domestic market in the future. However, downstream consumption demand is gradually weakening. Under this influence, the most-traded SHFE zinc contract is expected to remain in the doldrums in the short term.