The macro front and fundamentals continue to intertwine, with SHFE zinc expected to remain in the doldrums [SMM Zinc Morning Comment]

SMM reported on July 16:

Overnight, LME zinc opened at $2,702/mt. Subsequently, LME zinc briefly oscillated around the daily average line, before bulls reduced their positions, causing LME zinc to continuously decline below the daily average line. During this period, LME zinc attempted to rise above the daily average line but was ultimately blocked and pulled back, reaching a low of $2,676/mt. Entering the night session, LME zinc rapidly rose, touching a high of $2,715/mt, before slightly pulling back at the end of the session. It ultimately closed down at $2,699.5/mt, a decrease of $2/mt or 0.07%. Trading volume decreased to 87,937 lots, while open interest decreased by 7,174 lots to 187,000 lots. Overnight, LME zinc inventory increased by 2,750 mt to 121,350 mt, a growth of 2.32%. LME zinc recorded a four-day losing streak overnight, with the 5/20-day moving averages forming resistance above and the lower Bollinger Bands providing support below. Market sentiment fluctuated greatly due to rumors that Trump would fire Powell, causing the US dollar index to dive during the session. Meanwhile, the US PPI in June hit a new low since September 2024, and the center of LME zinc continued to decline.

Overnight, the most-traded SHFE zinc 2508 contract opened at 21,975 yuan/mt. After opening, SHFE zinc touched a low of 21,970 yuan/mt, before rapidly rising. However, bulls reduced their positions, causing SHFE zinc to continuously decline below the daily average line. Subsequently, bears reduced their positions, and SHFE zinc continuously rose, touching a high of 22,120 yuan/mt. It ultimately closed up at 22,100 yuan/mt, an increase of 55 yuan/mt or 0.25%. Trading volume decreased to 37,483 lots, while open interest decreased by 5,592 lots to 72,719 lots. Overnight, SHFE zinc recorded a bullish candlestick, with the 5/20-day moving averages forming resistance above and the lower Bollinger Bands providing support below. Currently, the domestic supply side is expected to remain loose, weakening support for SHFE zinc. Meanwhile, downstream consumption is weakening, but there are many macro uncertainties. It is expected that SHFE zinc will maintain in the doldrums in the short term.