US ADP employment data unexpectedly cools, LME zinc center rebounds [SMM Zinc Morning Meeting Summary]

Zinc Morning Meeting Notes on July 3

Futures Market: Overnight, LME zinc opened at $2,715/mt. After opening, LME zinc fluctuated along the daily average line, hitting a low of $2,700/mt during the session. It then rebounded from the low and continued to rise, reaching a high of $2,759/mt near the close. It finally closed up at $2,753/mt, gaining $39.5/mt or 1.46%. Trading volume decreased to 10,568 lots, while open interest increased by 837 lots to 209,000 lots. Overnight, the most-traded SHFE zinc 2508 contract opened at 22,320 yuan/mt. In the early session, SHFE zinc hit a low of 22,285 yuan/mt, then slowly fluctuated upward. After reaching a high of 22,400 yuan/mt, it maintained a fluctuating trend above the daily average line. It finally closed up at 22,375 yuan/mt, gaining 145 yuan/mt or 0.65%. Trading volume decreased to 57,402 lots, while open interest increased by 180 lots to 130,000 lots.

Macro: The US ADP employment data for June recorded the largest decline since March 2023, with interest rate futures almost fully pricing in a September interest rate cut by the US Fed. Trump announced a trade agreement with Vietnam, imposing a 20% tariff. Richmond Fed President Barkin stated that there was currently no urgency to change policy. UK Chancellor Reeves cried in Parliament, prompting an emergency statement from the UK Prime Minister expressing support for Reeves. Vice Premier Zhang Guoqing of the State Council emphasized adhering to technological empowerment, accelerating industrial innovation, and continuously promoting high-quality development of the manufacturing sector. The list of 800 billion yuan "implement major national strategies and build up security capacity in key areas" construction projects for this year has been fully issued. European Commission President von der Leyen met with Wang Yi. Starting from August 1, cash purchases of gold exceeding 100,000 yuan will need to be reported.

Spot Market:

Shanghai: Yesterday, there were not many traders shipping goods in the Shanghai market. The spot premiums of domestically produced zinc continued to rise against the average price, but the futures market maintained a fluctuating trend. Downstream buyers continued to wait and see, still purchasing only for immediate needs. Spot market transactions were generally sluggish.

Guangdong: There was a spot discount of 40 yuan/mt against Shanghai spot prices. Overall, the futures market showed a slight upward trend yesterday, with spot market transactions being sluggish. Although traders offered higher quotes, due to the relatively sluggish downstream demand, the actual transaction premiums in the market all declined. Spot premiums continued to fall slightly yesterday.

Tianjin: There was a spot discount of 70 yuan/mt against Shanghai prices. Yesterday, the futures market maintained a fluctuating trend, with downstream buyers having poor purchasing sentiment. Enterprises mainly restocked for immediate needs or waited for long-term contract deliveries. Traders maintained stable quotes, with a refusal to budge on prices, and premiums remained stable. Overall market transactions were poor.

Ningbo: There was a spot discount of 20 yuan/mt against Shanghai spot prices. Recently, a large amount of zinc ingots from various brands have arrived in the Ningbo market, with ample supply. Traders continued to lower spot premiums to facilitate sales, but the futures market maintained a fluctuating trend. Downstream orders were weak, and purchasing enthusiasm was generally low. Overall market transactions still met immediate needs.

Social inventory: On July 2, LME zinc inventory fell by 1,475 mt to 113,425 mt, a decrease of 1.28%. 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, with domestic inventory recording an increase.

Zinc price outlook: Overnight, LME zinc recorded a bullish candlestick, with the upper Bollinger Band forming resistance. The US ADP employment data for June was significantly lower than the previous value and expectations, causing market expectations for an interest rate cut to heat up again. The US dollar index fell back from highs, and coupled with ongoing tariff uncertainties, non-ferrous metals generally rose, with the center of LME zinc rebounding slightly. Overnight, SHFE zinc recorded a bullish candlestick, with the 5-day moving average providing support below. Driven by the LME trend, SHFE zinc opened higher with a gap. Currently, zinc ingot inventory remains relatively low, still providing some support for zinc prices, with SHFE zinc rising slightly in the night session.