Tariff issue resurfaces, LME zinc continues to decline [SMM Zinc Morning Meeting Summary]

SMM Zinc Morning Meeting Notes on July 8
Futures: Overnight, LME zinc opened at $2,733.5/mt. Early in the session, LME zinc briefly rose to a high of $2,734.5/mt. Subsequently, longs reduced their positions, causing LME zinc to fluctuate downward throughout the session, reaching a low of $2,682/mt at the close. It eventually closed at $2,683/mt, down $52.5/mt or 1.92%. Trading volume increased to 9,067 lots, while open interest decreased by 3,154 lots to 203,000 lots. Overnight, the most-traded SHFE zinc 2508 contract opened at 22,070 yuan/mt. Early in the session, longs continued to reduce their positions, and SHFE zinc fluctuated downward, reaching a low of 22,010 yuan/mt. It eventually closed at 22,030 yuan/mt, down 60 yuan/mt or 0.27%. Trading volume decreased to 58,548 lots, while open interest decreased by 218 lots to 126,000 lots.
Macro: Trump sent tariff letters to 14 countries, extending the suspension period for reciprocal tariffs until August 1. Kevin Warsh, a leading candidate for Fed Chairman, stated that the Fed should cut interest rates to a lower level. A Fed research report warned of the risk of zero interest rates reappearing amid uncertain economic prospects. Parties involved in the Gaza ceasefire have still failed to reach an agreement. The Houthi forces launched their first attack on Red Sea merchant ships since December last year. Sources said that OPEC+ will approve another significant production increase of approximately 550,000 barrels per day in September. The National Development and Reform Commission (NDRC) and three other departments aim to have over 100,000 large-power charging facilities nationwide by the end of 2027. The central bank has increased its gold reserves for the eighth consecutive month.
Spot Market:
Shanghai: Yesterday, the average price in Shanghai still rose by a relatively large margin. The futures market declined MoM, reaching the psychological price level of some downstream consumers. As a result, spot pricing increased in the market, and traders actively sold goods. Overall, spot transactions improved.
Guangdong: Overall, inventory in the Guangdong region has increased. Although the futures market's center of gravity declined yesterday, downstream purchases were still mainly driven by immediate needs, with insufficient purchasing enthusiasm. The market trading atmosphere was average, and spot premiums fell.
Tianjin: Yesterday, the futures market pulled back, leading to an increase in downstream spot pricing and cargo pick-up. Some enterprises restocked based on immediate needs, and traders slightly increased their quotes. Overall, market transactions improved.
Ningbo: Yesterday, traders in the Ningbo market actively quoted prices. Spot premiums showed little change compared to last week. The futures market slightly declined, and some downstream consumers purchased at lower prices, with purchasing enthusiasm increasing MoM. However, overall transaction improvements were limited.
Social Inventory: On July 7, LME zinc inventory decreased by 1,725 mt to 110,600 mt, a decline of 1.54%. According to SMM communications, as of Monday (July 7), the total zinc ingot inventory in seven locations tracked by SMM was 89,100 mt, an increase of 8,500 mt from June 30 and an increase of 6,700 mt from July 3. Domestic inventory recorded an increase.
Zinc price forecast: Overnight, LME zinc recorded a large bearish candlestick. US President Trump announced that new tariffs would be imposed on a series of countries, including Japan and South Korea, starting from August 1. The US dollar index surged significantly, putting pressure on non-ferrous metals, and LME zinc closed lower. Overnight, SHFE zinc recorded a small bearish candlestick. Amid expectations of weakening consumption, domestic social inventory of zinc ingots continued to increase, weakening support for zinc prices. With bearish macro sentiment, SHFE zinc was dragged down by LME zinc and is expected to remain in the doldrums and consolidate mainly today.