LME zinc inventory has been declining, while zinc prices remain high [SMM Zinc Morning Meeting Summary]

Zinc Morning Meeting Notes on June 30

Futures Market: On Friday, LME zinc opened at $2,768.5/mt. Initially, it maintained a fluctuating trend, then dropped during the midday session, touching a low of $2,741/mt before rebounding. It approached a high of $2,782/mt near the close and ultimately closed up at $2,778.5/mt, rising by $8.5/mt or 0.31%. Trading volume decreased to 12,465 lots, and open interest fell by 962 lots to 210,000 lots. On the same day, the most-traded SHFE zinc 2508 contract opened at 22,330 yuan/mt. It touched a low of 22,330 yuan/mt initially, then rose steadily to approach a high of 22,485 yuan/mt. It closed up at 22,460 yuan/mt, rising by 50 yuan/mt or 0.22%. Trading volume decreased to 64,238 lots, and open interest increased by 1,155 lots to 144,000 lots.

Macro: Trump: A ceasefire in Gaza may be "close" to being reached. If Iran agrees to peace, sanctions on Iran will be lifted. He does not believe Iran is hiding some enriched uranium before the US launches an attack. Trump: The US should keep interest rates at 1% or 2%. There is no need to extend the July 9 tariff deadline, but it can be extended, which is not a big deal. The EU and the US are reportedly confident in reaching a tariff agreement before the July deadline. US consumer spending unexpectedly fell in May, while PCE inflation rose mildly. Russia launched its largest airstrike on Ukraine since the conflict began, and a Ukrainian F-16 fighter jet crashed. Russian President Putin: Russia plans to cut military spending and is ready to hold a new round of talks with Ukraine. It is open to talks with the US. The US Senate began debating the "Big and Beautiful" bill. The central bank held its Q2 regular meeting and proposed increasing the intensity of monetary policy regulation. The China Securities Regulatory Commission (CSRC) seriously investigated financial fraud cases and, for the first time, held parties involved in fraud accountable simultaneously.

Spot Market:

Shanghai: The futures market continued to hold up well. On Friday, the premium in the Shanghai market continued to decline, but the rise in the futures market dampened downstream buying sentiment. Downstream purchases remained just for immediate needs, and spot trades were sluggish.

Guangdong: There was a spot discount of 20 yuan/mt against Shanghai spot. Overall, on Friday, the futures market rose again, and downstream purchasing enthusiasm was insufficient. Market transactions were sluggish. Some traders offered higher premiums in the morning session but slightly lowered them to sell under these circumstances.

Tianjin: There was a spot discount of 90 yuan/mt against SHFE zinc. Zinc prices continued to rise, and downstream buyers were cautious due to high prices, with fewer inquiries and price quotes. Trader quotes were mixed. Some traders continued to lower premiums to sell, while others held back inventory waiting for delivery. Overall, market transactions were poor.

Ningbo: There was a spot premium of 30 yuan/mt against Shanghai spot. Anning zinc ingots arrived in Ningbo, supplementing the market's zinc ingot supply. The futures market rose significantly MoM, and traders continued to lower premium quotes to sell. However, downstream buyers were cautious due to high prices, and overall transactions were mediocre.

Social inventory: On June 27, LME zinc inventory increased by 625 mt to 119,225 mt, a decrease of 0.52%. According to communication with SMM, as of June 23, the total zinc ingot inventory across seven locations tracked by SMM was 77,800 mt, a decrease of 1,000 mt from June 16 and a decrease of 1,800 mt from June 19, indicating a decline in domestic inventory.

Zinc price forecast: Last Friday, LME zinc recorded a bullish candlestick, with the 5-day moving average providing support below. The US dollar index maintained a fluctuating trend, and macro sentiment remained unchanged. Additionally, LME zinc inventory continued to decline to a yearly low, providing ongoing support for zinc price movements. LME zinc maintained a fluctuating trend at highs. Last Friday, SHFE zinc also recorded a bullish candlestick, with the 5-day moving average providing support below. Although mine processing fees (TCs) continued to rise, there were production cuts planned at large zinc smelters in July, and zinc ingot inventory buildup fell short of expectations, still providing support for zinc prices. Bullish sentiment persisted in the market, and it is expected that SHFE zinc will continue to hold up well.