The ratio of cancelled LME zinc warrants increased to over half, with zinc prices hitting a nearly four-month high [SMM Morning Meeting Summary]

Zinc Morning Meeting Notes on July 22

Futures Market: Overnight, LME zinc opened at $2,825/mt. Early in the session, LME zinc quickly dipped to $2,823.5/mt before consolidating around $2,840/mt. During European trading hours, bears reduced their positions, causing LME zinc to rally to $2,876/mt. Subsequently, the price center pulled back below the daily average line, closing up at $2,844.5/mt, up $20.5/mt or 0.73%. Trading volume decreased to 18,296 lots, while open interest fell by 2,926 lots to 184,000 lots. Overnight, the most-traded SHFE zinc 259 contract opened at 22,880 yuan/mt. Early in the session, SHFE zinc was in the doldrums, dipping to 22,760 yuan/mt. Subsequently, amid longs entering and shorts exiting, SHFE zinc fluctuated upward, with the price center moving up to around 22,870 yuan/mt. It closed up at 22,875 yuan/mt, up 90 yuan/mt or 0.39%. Trading volume decreased to 72,406 lots, while open interest fell by 1,049 lots to 132,000 lots.

Macro Front: The EU is seeking broader potential countermeasures against US tariffs; Bessent: Trade negotiations will prioritize quality over deadlines; Powell faces criminal charges from Trump allies; A new round of negotiations between Ukraine and Russia is scheduled for the 23rd; Li Qiang signed a State Council decree, announcing the "Housing Rental Regulations"; Guangdong and Anhui: Further standardize the competitive order of the NEV industry.

Spot Market:

Shanghai: In the morning session, futures prices rose significantly compared to last week, heavily suppressing downstream buying sentiment. Meanwhile, traders also showed low enthusiasm for selling, causing spot premiums to continue to decline. Some downstream enterprises made purchases as needed, but mostly through deferred pricing. Overall, market transactions were sluggish.

Guangdong: The spot premium against Shanghai was 0 yuan/mt. Overall, with the current significant rally in zinc prices, downstream purchase willingness was low, and traders faced difficulties in selling. Some traders lowered premiums and discounts to facilitate sales, but overall market transactions remained sluggish yesterday, with spot premiums and discounts declining.

Tianjin: The Tianjin market was trading at a discount of around 40 yuan/mt against the Shanghai market. Boosted by favourable macro front, futures prices rallied sharply yesterday. Downstream enterprises were cautious about purchasing due to high prices, showing low enthusiasm for buying and asking fewer prices. Traders continuously lowered premiums and discounts to facilitate sales, with a small amount of transactions occurring between traders. Overall, transactions were poor.

Ningbo: The spot quote against Shanghai was a premium of 10 yuan/mt. Over the weekend, Qilin and other zinc ingots arrived in the Ningbo market, with overall cargo volumes remaining abundant. Additionally, the absolute high price of futures yesterday suppressed downstream buying sentiment, causing spot premiums to continue to decline. Downstream enterprises continued to wait and see, with overall transactions continuing to deteriorate.

Social Inventory: On July 21, LME zinc inventory decreased by 875 mt to 118,225 mt, a decline of 0.73%. According to SMM communication, as of July 21, the total zinc ingot inventory across seven locations tracked by SMM was 92,700 mt, a decrease of 400 mt compared to July 14 and a decrease of 800 mt compared to July 17. Domestic inventory recorded a decrease.

Zinc Price Forecast: Overnight, LME zinc recorded a long upper shadow bullish candlestick, with the upper track of the Bollinger Bands providing support below. Overnight, LME zinc reached a nearly four-month high, primarily due to a sharp increase in LME cancelled warrants to 59,900 mt, with the ratio of cancelled warrants increasing to over half, triggering supply concerns. Subsequent attention should be paid to the funds of major players and inventory changes. Overnight, SHFE zinc recorded a doji, with various moving averages below providing support. Driven by LME overnight, SHFE zinc fluctuated at highs, filling the previous gap in zinc prices. However, caution is advised against the pressure from hedging positions at highs, and prudent operation is recommended.

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