LME zinc prices fell slightly, with attention to subsequent macro disturbances [SMM Zinc Morning Meeting Summary]

Zinc Morning Meeting Notes on July 2

Futures Market: Overnight, LME zinc opened at $2,742.5/mt. Initially, LME zinc rose to $2,749/mt, then quickly fell below the daily average line, oscillating there. After another failed attempt to rise, it fell back near the daily average line. Near the close, LME zinc slid again, reaching a low of $2,708/mt, and closed down at $2,713.5/mt, a drop of $27.5/mt or 1%. Trading volume increased to 12,773 lots, and open interest rose by 842 lots to 208,000 lots. Overnight, the most-traded SHFE zinc 2508 contract opened at 22,250 yuan/mt. Initially, SHFE zinc rose to 22,305 yuan/mt, then oscillated downward throughout. Near the close, it reached a low of 22,150 yuan/mt and closed down at 22,175 yuan/mt, a drop of 80 yuan/mt or 0.36%. Trading volume decreased to 55,730 lots, and open interest rose by 165 lots to 135,000 lots.

Macro: Trump: Not considering extending the July 9 tariff negotiation deadline; doubts whether an agreement with Japan can be reached. Vance "breaks the deadlock with one vote," and the US Senate passes the "Big and Beautiful" bill. Fed Chairman Powell: Cannot say whether a July interest rate cut would be premature, does not rule out any meeting. Trump: Does not want to own EVs as they may explode, "considers deporting" Musk. US Treasury Secretary Bessent: Trade agreement with India is "very close." President Xi Jinping presides over the sixth meeting of the Central Financial and Economic Affairs Commission. The Caixin China General Services PMI for June returns above the threshold. Domestic refined oil prices increase, costing 9 yuan more to fill a tank. The Hong Kong Monetary Authority buys 20.018 billion Hong Kong dollars in the market.

Spot Market:

Shanghai: Yesterday morning, the futures market declined significantly. Some downstream buyers took advantage of the low prices to purchase spot cargoes, improving spot market transactions. Traders also increased their purchases. Domestic spot premiums rose, while other quotes remained basically stable, with some divergence in spot premiums.

Guangdong: Spot discounts against Shanghai spot cargoes were 30 yuan/mt. Overall, despite the decline in the futures market yesterday, current market consumption remains sluggish. Meanwhile, arrivals in Guangdong increased this week, boosting spot cargo circulation. Traders' sales did not improve significantly, and spot premiums continued to fall.

Tianjin: Spot discounts against SHFE zinc were 70 yuan/mt. Despite the decline in the futures market yesterday, downstream consumption remains poor. Enterprises mainly restock based on immediate needs, without significant restocking. Traders' quotes were mixed, but premiums rose slightly. Spot premiums and discounts in Tianjin rebounded to a small discount state, with active trading among traders. Overall market transactions improved slightly compared to the previous day.

Ningbo: Spot premiums against Shanghai spot cargoes were 20 yuan/mt. Qilin zinc ingots arrived in the Ningbo market. Yesterday, Ningbo's spot premium quotes remained basically stable. The futures market declined significantly compared to the previous day, with some enterprises purchasing at low prices. Overall spot market transactions were moderate.

Social inventory: On July 1, LME zinc inventory decreased by 2,575 mt to 114,900 mt, a decline of 2.19%. According to communication with SMM, as of June 30, the total zinc ingot inventory across seven regions tracked by SMM was 80,600 mt, an increase of 2,800 mt from June 23 and 1,100 mt from June 26, indicating a rise in domestic inventory.

Zinc price forecast: Overnight, LME zinc recorded a bearish candlestick, with the 10-day moving average providing support below. As the tariff suspension deadline approaches, the market continues to focus on macroeconomic disruptions. The US dollar index first fell and then rose, with LME zinc maintaining a low-level fluctuation. Overnight, SHFE zinc recorded a bearish candlestick, with the 10-day moving average forming resistance above. LME zinc prices fell slightly, and the gradual realization of increased domestic zinc ingot supply, coupled with a strong supply and weak demand fundamental situation, continues to suppress zinc price trends, with the SHFE zinc price center slightly declining.