Dragged down by LME in the doldrums, the center of SHFE zinc prices sank [SMM Morning Meeting Summary]

Zinc Morning Meeting Notes on August 4

Futures Market: Last Friday, LME zinc opened at $2,769/mt. In the early session, LME zinc fluctuated rangebound around the daily average line. During European trading hours, LME zinc fluctuated downward amid short selling and long liquidation, approaching the night session and hitting a low of $2,711.5/mt. Entering the night session, LME zinc recovered upward but was blocked by the daily average line, eventually closing down at $2,725.5/mt, down $32.5/mt or 1.18%. Trading volume increased to 14,107 lots, while open interest decreased by 568 lots to 189,000 lots. Last Friday, the most-traded SHFE zinc 2509 contract opened lower with a gap at 22,225 yuan/mt. In the early session, SHFE zinc briefly touched a high of 22,265 yuan/mt before the price center moved below the daily average line. Near the end of the session, it recovered upward to around 22,235 yuan/mt, eventually closing down at 22,225 yuan/mt, down 120 yuan/mt or 0.54%. Trading volume decreased to 53,871 lots, while open interest decreased by 2,926 lots to 105,000 lots.

Macro: Trump's new round of tariffs triggered a global stock market crash, with many countries seeking to renegotiate. US job growth slowed down and the labour market showed deeper cracks, increasing the probability of a US Fed interest rate cut in September. Trump fired Labour Department officials over data issues and gained an early opportunity to reshape the US Fed.

Spot Market:

Shanghai: The futures market was basically stable compared to last Thursday. Traders continued to actively sell, and spot premiums remained unchanged from last Thursday. Downstream enterprises showed low purchase willingness, continuing to purchase based on immediate needs. Spot transactions were mediocre.

Guangdong: It was trading at a discount of 0 yuan/mt to Shanghai spot. Overall, last Friday, the futures market maintained a fluctuating trend. Downstream enterprises had already conducted a small amount of procurement on last Thursday, and procurement demand pulled back. Traders faced relatively difficulties in selling, and market transactions weakened.

Tianjin: Tianjin was trading at a discount of around 30 yuan/mt to Shanghai. The futures market was in the doldrums. Some enterprises had completed restocking on last Thursday, and actual transactions were limited on last Friday. Traders had a psychological tendency to refuse to budge on prices, leading to an increase in spot premiums. Trading between traders was relatively active, but overall transactions weakened compared to last Thursday.

Ningbo: Qilin zinc ingots arrived in the Ningbo market. Transactions were moderate on last Thursday, and some traders continued to raise spot quotes on last Friday. However, the futures market maintained a fluctuating trend. Downstream enterprises had built up some inventory from purchases on last Thursday, and spot transactions were mediocre on last Friday.

Social Inventory: On August 1, LME zinc inventory decreased by 3,975 mt to 100,825 mt, a decrease of 3.79%. According to SMM communication, 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 slightly decreased.

Zinc Price Outlook: Last Friday, LME zinc recorded three consecutive negative sessions, with the middle rail of the Bollinger Bands forming resistance. The unexpected disappointment in non-farm payrolls data last Friday indicated a weak US job market, raising market concerns about the US economic outlook and causing the center of LME zinc to move lower. Last Friday, SHFE zinc recorded a small bearish candlestick, with the KDJ opening expanding downward. Affected by the decline in LME last Friday, SHFE zinc was in the doldrums. Against the backdrop of increased production by smelters, there was insufficient consumption support, and zinc prices encountered resistance. Attention should be paid to capital dynamics.

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.