US June PCE index exceeds expectations, LME zinc fluctuates downward [SMM Zinc Morning Meeting Summary]

Zinc Morning Meeting Notes on August 1

Futures Market: Overnight, LME zinc opened at $2,779/mt. Early in the session, LME zinc reached a high of $2,805/mt, then fluctuated downward along the daily average line, touching a low of $2,742/mt near the close. It eventually closed at $2,762/mt, down $33.5/mt or 1.2%. Trading volume increased to 11,799 lots, and open interest rose by 1,164 lots to 190,000 lots. Overnight, the most-traded SHFE zinc 2509 contract opened at 22,300 yuan/mt. Early in the session, SHFE zinc briefly fluctuated, touching a low of 22,285 yuan/mt, then rose steadily, reaching a high of 22,425 yuan/mt during the session before fluctuating rangebound. It eventually closed at 22,400 yuan/mt, up 55 yuan/mt or 0.25%. Trading volume decreased to 44,861 lots, and open interest fell by 1,593 lots to 109,000 lots.

Macro: Trump revised reciprocal tariff rates for certain countries; US core PCE inflation unexpectedly warmed up in June; Trump urged pharmaceutical giants to slash US drug prices; Trump's team led a rare earth meeting last week; Iranian Foreign Minister: US needs to pay compensation before restarting nuclear talks; Cyberspace Administration of China interviewed Nvidia over chip security issues; China's manufacturing PMI fell by 0.4 percentage points MoM in July.

Spot Market:

Shanghai: Futures prices fell significantly MoM. Yesterday, more traders in the Shanghai market shipped goods. Amid reluctance to budge on prices, premiums rose MoM. Some downstream enterprises purchased at low prices, but most still preferred factory-pickup and delivery of zinc ingots. Overall spot trading improved.

Guangdong: Spot discounts against Shanghai were 20 yuan/mt. Overall, with futures prices falling yesterday, downstream purchasing enthusiasm increased, with many choosing to buy in small quantities or fix prices. Premiums and discounts quoted by traders continued to rise. Coupled with a slight improvement in market transactions, spot premiums and discounts increased.

Tianjin: Tianjin reported spot discounts of 40 yuan/mt against Shanghai. Futures prices fell sharply, increasing downstream restocking enthusiasm at low prices. There were many inquiries and orders placed, but actual transactions remained limited. Traders had a reluctance to budge on prices, leading to an increase in premiums. Trading among traders was also active, with overall transactions improving compared to the previous day.

Ningbo: Spot premiums against Shanghai were 20 yuan/mt. Yesterday, futures prices fell significantly, and spot premium quotes increased MoM. Some traders shipped goods casually, leading to a chaotic market price. Downstream enterprises took advantage of this to fix prices, and transactions improved.

Social Inventory: On July 31, LME zinc inventory fell by 4,250 mt to 104,800 mt, a decrease of 3.9%. According to SMM, as of July 31, the total zinc ingot inventory across seven locations tracked by SMM was 103,200 mt, an increase of 4,900 mt from July 24 and a decrease of 500 mt from July 28. Domestic inventory fell slightly.

Zinc Price Forecast: Overnight, LME zinc recorded a bullish candlestick, with the 5-day moving average above acting as resistance. The US June PCE index exceeded expectations unexpectedly, causing the US dollar index to continue rising. Uncertainties regarding tariffs still persist, and LME zinc continues to fluctuate downward. Overnight, SHFE zinc also recorded a bullish candlestick, with the 40-day moving average above acting as resistance. SMM forecasts that domestic refined zinc production will continue to increase in August. The pattern of supply increasing and demand weakening on the fundamentals side remains unchanged. SHFE zinc will maintain a fluctuating trend overnight, and attention should be paid to changes in macro sentiment.

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. These data are for reference only and do not constitute decision-making advice.