LME zinc falls back from highs, market continues to focus on trade negotiation progress [SMM Zinc Morning Meeting Summary]

Zinc Morning Meeting Notes on July 1

Futures Market: Overnight, LME zinc opened at $2,780.5/mt. After opening, LME zinc fluctuated rangebound around the daily average line, then fluctuated upward to reach a high of $2,785/mt. Subsequently, it pulled back from highs and continued to decline, reaching a low of $2,740.5/mt at the end of the session. It finally closed down at $2,741/mt, a decrease of $37.5/mt or 1.35%. Trading volume decreased to 12,088 lots, and open interest decreased by 2,439 lots to 208,000 lots. Overnight, the most-traded SHFE zinc 2508 contract opened at 22,380 yuan/mt. After opening, SHFE zinc fluctuated rangebound around the daily average line, reaching a high of 22,420 yuan/mt during the session and a low of 22,350 yuan/mt at the end of the session. It finally closed down at 22,365 yuan/mt, a decrease of 130 yuan/mt or 0.58%. Trading volume decreased to 51,262 lots, and open interest decreased by 1,350 lots to 139,000 lots.

Macro: US Fed's Bostic: Still expects one interest rate cut this year and three next year; White House: Trump will meet with trade team this week to determine national tariff rates; Bessent: Trump considering appointing Powell's successor early next year, with current governors as candidates; Trump: Expects (Ukraine) to reach a ceasefire agreement with Russia due to low oil prices; Musk: If the "Big and Beautiful" bill passes, will establish a new political party in the US the next day; National Bureau of Statistics (NBS): Manufacturing PMI was 49.7% in June, up 0.2 percentage points MoM; Ministry of Finance: Overseas investors directly investing allocated profits that meet conditions can claim a tax credit of 10% of the investment amount; China Securities Regulatory Commission (CSRC) updated its logo, changing from a ring to three V-shaped rings embracing each other; China is expected to study and introduce policies to further deepen financial services for new-type industrialization.

Spot Market:

Shanghai: In the morning session, the futures market declined somewhat, but downstream players continued to be bearish on zinc prices and premiums. The enthusiasm for purchasing remained low yesterday, and spot market transactions improved slightly but with limited magnitude. To facilitate sales, traders continued to lower their spot premium quotes.

Guangdong: On par with Shanghai spot. Overall, the futures market maintained a fluctuating trend yesterday. There were many traders offering goods for sale, but downstream consumption demand was weak. Some traders found it relatively difficult to sell goods, so they lowered premiums to facilitate sales, and spot premiums and discounts declined.

Tianjin: Tianjin reported a discount of 80 yuan/mt against Shanghai spot. Zinc prices continued to fluctuate at highs, and downstream purchasing sentiment was poor, with fewer inquiries and price negotiations. Traders' quotes were chaotic, and spot order transactions were poor. Some traders fulfilled long-term contracts and temporarily did not offer goods for sale. Social inventory continued to build up, and Tianjin remained in a discounted state. Overall, market transactions were poor.

Ningbo: Reported a premium of 20 yuan/mt against Shanghai spot. Yesterday, there were not many traders shipping goods in the Ningbo market, and spot premium quotes continued to decline. Although the futures market pulled back, downstream enterprises continued to wait and see, purchasing only to meet immediate needs, resulting in generally moderate spot cargo transactions in the market.

Social inventory: On June 30, LME zinc inventory fell by 1,750 mt to 117,475 mt, a decrease of 1.47%. According to communication with SMM, as of June 30, the total zinc ingot inventory across seven locations tracked by SMM was 80,600 mt, an increase of 2,800 mt from June 23 and an increase of 1,100 mt from June 26, indicating a rise in domestic inventory.

Zinc price outlook: Overnight, LME zinc recorded a bearish candlestick, with the 5-day moving average providing support below. The market continued to focus on the progress of trade negotiations between Canada and the US, with some investors taking profits and exiting the market. LME zinc pulled back from its highs, with the price center slightly declining. Overnight, SHFE zinc also recorded a bearish candlestick, with the 5-day moving average forming resistance above. The production increase of domestic smelters gradually materialized, and SMM's zinc social inventory also continued to accumulate on Monday. With the zinc fundamentals showing increased supply and weak demand, coupled with the weakening of the LME market, SHFE zinc pulled back during the night session.