US non-farm payrolls data is strong, while LME zinc lacks upward momentum [SMM Zinc Morning Meeting Summary]

Zinc Morning Meeting Notes on July 4

Futures Market: Overnight, LME zinc opened at $2,753/mt. After opening, LME zinc fluctuated along the daily average line, reaching a high of $2,759.5/mt during the session. Near the end of the session, LME zinc fell below the daily average line, touching a low of $2,734/mt at the close. It eventually closed down at $27,338/mt, a decrease of $15/mt or 0.54%. Trading volume decreased to 6,367 lots, and open interest decreased by 2,486 lots to 207,000 lots. Overnight, the most-traded SHFE zinc 2508 contract opened at 22,295 yuan/mt. In the early session, SHFE zinc touched a low of 22,260 yuan/mt, then rapidly rose. After reaching a high of 22,365 yuan/mt, SHFE zinc began to fluctuate above the daily average line. It eventually closed up at 22,330 yuan/mt, an increase of 5 yuan/mt or 0.02%. Trading volume decreased to 47,375 lots, and open interest decreased by 294 lots to 128,000 lots.

Macro: Non-farm payrolls data unexpectedly exceeded expectations, causing traders to no longer bet on a US Fed interest rate cut in July and reducing the probability of a September cut. US Treasury Secretary Bentsen: It is expected that about 100 countries will receive at least a 10% reciprocal tariff. Trump is expected to send letters as early as Friday local time to inform trading partners of unilateral tariff rates. The US "Big and Beautiful" bill passed the House of Representatives with the opposition of two Republican lawmakers. Trump and Putin had a phone call to discuss the Middle East situation and Russia-Ukraine negotiations. It is reported that US Special Envoy for the Middle East Wittkoff plans to meet with the Iranian Foreign Minister next week to restart nuclear negotiations. According to delegates, OPEC+ discussed increasing production by 411,000 barrels per day in August. Foreign Minister Wang Yi stated: Rare earths will not become an issue between China and Europe. The Ministry of Industry and Information Technology (MIIT) held the 15th Manufacturing Enterprise Symposium, emphasizing comprehensive governance of low-price and disorderly competition in the PV industry in accordance with laws and regulations. The US lifted export restrictions on China from the world's top three chip design software suppliers.

Spot Market:

Shanghai: The supply of domestic zinc ingots in the Shanghai market is limited. Some traders continue to show reluctance to budge on prices, with the premium over the average price continuing to rise. However, with the futures market rising MoM, downstream buyers are hesitant to inquire and purchase due to fear of high prices, resulting in poor overall spot trading performance.

Guangdong: There is a spot discount of 60 yuan/mt against Shanghai spot. Overall, the center of zinc prices rose yesterday compared to the previous day. The market has a strong fear of high prices, with fewer inquiries and purchases. The trading atmosphere is sluggish, and spot premiums continue to decline.

Tianjin: There is a spot discount of 100 yuan/mt against Shanghai spot. The futures market rose slightly yesterday, but downstream buying sentiment remains poor. Enterprises mainly focus on restocking based on immediate needs or wait for long-term contract deliveries. Traders maintain stable quotes and show reluctance to budge on prices, with premiums holding steady. Overall, market trading is poor.

Ningbo: There is a spot discount of 10 yuan/mt against Shanghai spot. In the Ningbo market, traders still had ample zinc ingot supply, and their quoted premiums rebounded with a passive attitude. However, downstream orders remained weak, as previous low-price purchases left some inventory on hand. Additionally, high futures prices dampened corporate buying sentiment, resulting in mediocre trading activity in Ningbo yesterday.

Social inventory: On July 3, LME zinc inventory dropped by 750 mt to 112,675 mt, down 0.66%. According to SMM data, as of July 3, the total zinc ingot inventory across seven major regions monitored by SMM stood at 82,400 mt, up 2,900 mt from June 26 and 1,800 mt from June 30, indicating a domestic inventory buildup.

Zinc price forecast: Overnight, LME zinc formed a bearish candlestick, finding support at the 10-day moving average. The US added 147,000 nonfarm payrolls in June, exceeding market expectations. Strong US employment data cooled market expectations for interest rate cuts, pushing the US dollar index higher and limiting LME zinc’s upward momentum. It is expected to maintain a fluctuating trend today. Overnight, SHFE zinc formed a bullish candlestick, supported by the 5-day moving average. Downstream orders stayed weak during the off-season, but zinc ingot supply remained robust. On Thursday, SMM zinc ingot inventory rose by 1,800 mt WoW to 82,400 mt, marking continued domestic inventory accumulation. With fundamentals favoring supply over demand, SHFE zinc is expected to maintain its fluctuating trend today.