US Fed continues to hold its ground, while LME zinc fluctuates considerably [SMM Morning Meeting Summary]

Futures Market:

Overnight, LME zinc opened at $2,636.5/mt. In the early session, LME zinc rapidly rose to a high of $2,660/mt, then fluctuated around the price center of $2,655/mt. During European trading hours, LME zinc dived below the daily average line to a low of $2,631/mt. Subsequently, it fluctuated around the price center of $2,637/mt. It finally closed up at $2,643.5/mt, up $7/mt or 0.27%. Trading volume decreased to 89,509 lots, while open interest fell by 3,356 lots to 208,000 lots. Overnight, SHFE zinc opened lower with a gap at 21,945 yuan/mt. After opening, it immediately dipped to a low of 21,920 yuan/mt, then rapidly rose to a high of 22,020 yuan/mt. Subsequently, as bulls reduced their positions, SHFE zinc fell to near the daily average line, fluctuating upwards around the price center of 21,960 yuan/mt. It finally closed down at 21,955 yuan/mt, down 105 yuan/mt or 0.48%. Trading volume decreased to 46,384 lots, while open interest fell by 6,064 lots to 91,164 lots.

Macro:

The US Fed kept interest rates unchanged for the fourth consecutive time. Trump reiterated that the Fed should cut interest rates. US media: Trump privately approved a plan to attack Iran but did not issue a final order. It is reported that if the US intervenes in the conflict between Israel and Iran, Russia has threatened to get involved. Putin: The next round of talks between Russia and Ukraine may be held after June 22. Khamenei said that Iran will not surrender and will not accept an imposed war or peace. The 2025 Lujiazui Forum opened, and the central bank announced eight major financial opening-up initiatives. Pan Gongsheng: In the future, the regular issuance of SDRs can be increased and the scale of issuance can be expanded. The CSRC introduced "1+6" policy measures to further deepen reforms, establishing a new Science and Technology Innovation Growth Tier.

Spot:

Shanghai: The futures market edged up slightly from yesterday. Downstream enterprises maintained a strong wait-and-see sentiment. Morning spot market transactions were sluggish. Traders continued to lower their premiums for domestically produced and imported zinc, but enterprises maintained their rigid demand, resulting in generally average overall transaction performance.

Guangdong: Overall, influenced by the weakening downstream demand, premiums and discounts in the Guangdong market continued to decline. Meanwhile, the futures market surged significantly yesterday, leading to a fear of high prices among downstream enterprises. They mainly focused on depleting their inventories and maintaining a wait-and-see stance. Transactions in the market were generally average yesterday, and spot premiums fell.

Tianjin: The futures market rebounded slightly. Downstream enterprises were cautious about purchasing due to a fear of high prices, and the prices did not reach their psychological price levels. They remained bearish on premiums. Traders continuously lowered premiums to facilitate sales, causing premiums to continue to pull back. Overall market transactions were weak.

Ningbo: Kylin zinc ingots arrived in the Ningbo market again. The futures market rebounded slightly yesterday. Downstream enterprises showed low purchase willingness. Overall transactions remained on a need-based basis. With poor spot consumption, some traders continued to lower their premium quotes.

Social inventory: On June 18, LME zinc inventory decreased by 625 mt to 128,250 mt, a decline of 0.48%. According to SMM communications, as of Monday (June 16), the total zinc ingot inventory across seven locations tracked by SMM was 78,100 mt, a decrease of 3,600 mt from June 9 and an increase of 1,000 mt from June 12. Domestic inventory recorded an increase.

Zinc price outlook: Overnight, LME zinc recorded a long upper shadow bullish candlestick, with the 20/60-day moving averages above exerting pressure. The US Fed held rates steady for the fourth consecutive time overnight. The US dollar index first fell and then rose before the Fed's interest rate decision announcement. Meanwhile, tensions in the Middle East led to strong market risk-averse sentiment, causing LME zinc to rise first and then fall, maintaining a fluctuating trend. Overnight, SHFE zinc recorded a small bullish candlestick, with the 20/60-day moving averages above exerting pressure and the 5-day moving average below providing support. Driven by the LME, LME zinc opened lower with a gap overnight. The Lujiazui Forum officially opened yesterday, with the central bank announcing eight major financial opening-up measures, releasing certain positive macro signals. However, with the current weakening of end-use demand in the fundamental landscape and the continued expectation of a wider supply side, there is still significant upward pressure on zinc prices. It is expected that zinc prices will remain in the doldrums in the short term.