Capital concentration increased, and zinc prices led the gains [SMM Morning Meeting Summary]

Summary of Zinc Morning Meeting on July 21

Futures Market: Last Friday, LME zinc opened at $2,737.5/mt. In the early session, LME zinc consolidated around the daily average line. During the European trading session, bulls increased their positions, causing LME zinc to fluctuate upward with the center running above the daily average line. Entering the night session, LME zinc accelerated its upward movement, with the center running near $2,820/mt and touching a high of $2,826.5/mt. It finally closed up at $2,824.5/mt, gaining $86.5/mt or 3.16%. Trading volume increased to 18,401 lots, while open interest decreased by 507 lots to 187,000 lots. Last Friday, the most-traded SHFE zinc 2509 contract opened higher with a gap at 22,420 yuan/mt. In the early session, bullish funds pushed SHFE zinc to rally rapidly, with the center moving up to near 22,800 yuan/mt. It touched a high of 22,890 yuan/mt and finally closed up at 22,880 yuan/mt, gaining 580 yuan/mt or 2.6%. Trading volume increased to 152,000 lots, while open interest increased by 18,294 lots to 134,000 lots.

Macro: US Secretary of Commerce: Confident in reaching an agreement with the EU; Bessent reportedly urged Trump not to fire Powell, Trump: No need; Waller: If the president asks me to be Fed Chairman, I will accept; Iran agrees to hold a new round of negotiations with three European countries; EU adopts the 18th round of sanctions against Russia; Japan's ruling coalition loses majority in the Senate; Ministry of Commerce: China's total retail sales of consumer goods are expected to exceed 50 trillion yuan this year; Special action meeting to combat smuggling and export of strategic minerals is held; MIIT: Stabilizing growth work plans for ten key industries, including steel, non-ferrous metals, and petrochemicals, are about to be issued.

Spot Market:

Shanghai: Last Friday, there was not much cargo offered in the Shanghai market, but the futures market rose significantly MoM, dampening downstream buying sentiment. Spot trades continued to deteriorate, and spot premiums continued to decline.

Guangdong: There was a premium of 40 yuan/mt against Shanghai spot. Overall, zinc prices rose MoM last Friday, with downstream fear of high prices being strong. Most purchases were for just-in-time procurement. Traders faced difficulties in selling cargo and slightly lowered premiums, but market transactions remained poor. Spot premiums and discounts in Guangdong fell.

Tianjin: The Tianjin market reported a discount of about 40 yuan/mt against the Shanghai market. Last Friday, the futures market rebounded sharply, with downstream buyers being cautious due to fear of high prices. Buying sentiment was weak last Friday, with most just-in-time procurement being for later pricing. Traders lowered premiums and discounts to sell cargo, and overall transactions were poor.

Ningbo: There was a premium of 10 yuan/mt against Shanghai spot quotes. Last Friday, there was not much cargo offered in the Ningbo market, and overall spot premiums remained stable. However, some downstream buyers had previously purchased at low prices for presale, and the rest of the enterprises still had just-in-time procurement due to fear of high prices. Spot trades in the market were slightly sluggish.

Social Inventory: According to communication with SMM, as of July 17, the total zinc ingot inventory in seven locations monitored by SMM was 93,500 mt, an increase of 3,300 mt from July 10 and an increase of 500 mt from July 14. Domestic inventory recorded an increase.

Zinc Price Forecast: On Friday last week, LME zinc recorded a large bullish candlestick, and the MACD turned bullish. On the same day, the US dollar index pulled back, leading to a general rise in non-ferrous metals. The LME 0-3 zinc contract once again shifted to a backwardation structure, and LME zinc inventory decreased. Coupled with the renewed focus on "anti-rat race" competition in China, capital concentration increased, pushing the center of LME zinc prices higher. On Friday last week, SHFE zinc also recorded a large bullish candlestick, with various moving averages below providing support and the KDJ indicator expanding upwards. On Friday last week, zinc prices showed a strong upward trend, driven by increased concentration of overseas capital. Additionally, the Ministry of Industry and Information Technology (MIIT) in China proposed the imminent release of a stable growth work plan for ten key industries, including steel, non-ferrous metals, and petrochemicals. Coupled with the commencement of the hydropower project in the lower reaches of the Yarlung Zangbo River, these factors were favorable for non-ferrous metals, leading zinc prices to lead the gains. Considering the positive macroeconomic and capital sentiment, zinc prices are expected to hold up well.

Data Source Statement: Except for publicly available information, all other data are based on publicly available information, market exchanges, and rely on SMM's internal database models, processed by SMM for reference only and do not constitute decision-making advice.