Macro positive sentiment, coupled with trade negotiations, drove zinc prices to hover at highs this week [SMM Market Review - Weekly Price Review]

LME zinc: At the start of the week, LME cancelled warrants surged to 59,900 mt, accounting for over half of the total, sparking market concerns over future supply trends and pushing LME zinc's center to a four-month high. Subsequently, stalled US trade negotiations heightened market tension, causing LME zinc to pull back slightly. However, escalating conflicts between Trump and the US Fed, coupled with a declining US dollar index and continued drawdowns in overseas inventories, provided some support. MMG's Q2 report showed a 12% YoY increase in zinc ore production, indicating relatively loose supply, keeping LME zinc in a fluctuating trend. Later, the US reached trade agreements with multiple countries, and China-US trade talks were scheduled, easing market risk-off sentiment. Yet, with overseas inventories still declining, LME zinc continued its fluctuating trend. Subsequently, progress in US trade partnerships lifted the US dollar index, while overseas inventories rose, leading to a slight dip in LME zinc. By Friday 15:00, LME zinc stood at $2,838/mt, up $14/mt (0.50%).

SHFE zinc: Early in the week, SHFE zinc hovered at highs, buoyed by LME strength. SMM data showed that as of Monday, zinc ingot inventories across seven regions totaled 92,700 mt, with domestic stocks declining. However, downstream demand entered the off-season, keeping SHFE zinc in a fluctuating trend due to fundamentals. Later, China's automotive industry began resisting "rat race" competition, and the release of the Rural Highway Regulations boosted domestic sentiment, supporting SHFE zinc at highs. The scheduled China-US trade talks further strengthened macro sentiment, keeping SHFE zinc elevated. The State-Owned Assets Supervision and Administration Commission pledged to oppose "rat race" competition, while the PBOC injected 400 billion yuan via 1-year MLF operations, sustaining positive policy support. A rebound in the US dollar index weakened LME zinc, causing SHFE zinc to pull back slightly but remain fluctuating. By Friday 15:00, SHFE zinc closed at 22,885 yuan/mt, up 590 yuan/mt (2.65%).