US economic data exceeds expectations, LME zinc edges down [SMM Zinc Morning Meeting Summary]

Zinc Morning Meeting Minutes on July 31

Futures market: Overnight, LME zinc opened at $2,810/mt, briefly fluctuated to a high of $2,818/mt at the beginning, then declined along the daily average line, touching a low of $2,782/mt near the close, and finally settled at $2,795.5/mt, down $19/mt (0.68%). Trading volume decreased to 8,740 lots, while open interest dropped by 1,109 lots to 189,000 lots. Overnight, the most-traded SHFE zinc 2509 contract opened at 22,625 yuan/mt, briefly rose to 22,685 yuan/mt initially, then retreated to a low of 22,535 yuan/mt, and maintained a fluctuating trend below the daily average line before closing at 22,555 yuan/mt, down 115 yuan/mt (0.51%). Trading volume decreased to 61,508 lots, while open interest increased by 816 lots to 117,000 lots.

Macro: The US Fed held rates steady, with Powell avoiding guidance on September rate cuts. Trump announced a 25% tariff on Indian goods and reached a trade deal with South Korea. US Q2 GDP grew 3%, prompting Trump to reiterate calls for rate cuts. US July ADP employment posted the fastest growth since March. China's central government preliminarily allocated 90 billion yuan in childcare subsidies this year.

Spot market:

Shanghai: Futures edged up MoM, with overall sales hindered. Traders lowered average price premiums to facilitate transactions, though plant-delivered zinc ingots remained discounted. Downstream buyers made only essential purchases, keeping spot premiums weak.

Guangdong: Reported spot discounts of 20 yuan/mt against Shanghai. Overall, futures rose slightly yesterday, but downstream purchasing enthusiasm pulled back, resulting in poor market turnover. However, traders showed reluctance to budge on prices, maintaining high premiums/discounts quotes. The price spread between futures contracts stayed flat from the previous day, with spot transactions weak and premiums/discounts unchanged.

Tianjin: Reported discounts of 40 yuan/mt against Shanghai. Futures rebounded slightly, but downstream buyers hesitated at higher levels, showing low purchasing interest. Traders lowered quotes slightly to boost sales, leading to weaker premiums and mainly inter-trader transactions, with overall poor turnover.

Ningbo: Reported spot premiums of 10 yuan/mt against Shanghai. Recent typhoon-induced flooding in some areas had no significant transport impact yet. Traders held premiums steady yesterday, but persistently high futures levels weakened downstream purchase willingness, resulting in average spot transactions.

Social inventory: On July 30, LME zinc inventory fell by 3,100 mt to 109,050 mt (down 2.76%). According to SMM surveys, as of July 28, SMM's seven-region zinc ingot inventory totaled 103,700 mt, up 11,100 mt from July 21 and 5,400 mt from July 24, recording a domestic inventory increase.

Zinc price forecast: Overnight, LME zinc recorded a bearish candlestick, with the 10-day moving average above acting as resistance. The US ADP employment data and GDP data for July both exceeded expectations, indicating continued strength in economic data. The US dollar index continued to rise, putting pressure on LME zinc, which declined slightly as it awaited guidance from trade negotiation results. Overnight, SHFE zinc also recorded a bearish candlestick, with the 40-day moving average below providing support. There was no clear macro guidance, and the market was mostly in a wait-and-see mode. However, with weak downstream demand during the recent off-season for consumption, the fundamentals provided insufficient support for zinc prices. Coupled with the drag from the decline in LME, SHFE zinc also weakened slightly.

Data source disclaimer: 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. These data are for reference only and do not constitute decision-making advice.