LME inventory drops below 100,000 mt, with strong bottom support for zinc prices [SMM Morning Meeting Summary]

Zinc Morning Meeting Notes on August 5

Futures: Overnight, LME zinc opened at $2,728/mt. After briefly dipping to $2,718.5/mt at the start of the session, LME zinc fluctuated upward along the daily average line, with the center moving up to $2,750/mt during the night session. It hit a high of $2,758.5/mt and closed up at $2,754/mt, gaining $24.5/mt or 0.9%. Trading volume decreased to 8,165 lots, while open interest increased by 1,135 lots to 190,000 lots. Overnight, the most-traded SHFE zinc 2509 contract opened at 22,330 yuan/mt. SHFE zinc oscillated near the daily average line at the start of the session, then moved down as shorts entered and longs exited, closing up at 22,280 yuan/mt, gaining 75 yuan/mt or 0.34%. Trading volume decreased to 38,443 lots, while open interest decreased by 2,510 lots to 100,000 lots.

Macro: The EU will suspend trade retaliation measures against the US for six months; Trump plans to significantly raise tariff rates on India; Fed's Daly: The time for interest rate cuts is approaching, and I lean towards more than two cuts this year; Citi raises its gold price forecast for the next 0-3 months; The Hong Kong dollar weakens, and the Hong Kong Monetary Authority buys HKD 9.42 billion.

Spot Market:

Shanghai: Futures continued to decline WoW. In the morning, some downstream buyers placed orders at lower prices, but most remained bearish, with actual purchases mainly driven by immediate needs. Trading improved slightly, with traders actively offloading goods, and spot premiums continued to rise.

Guangdong: There was a discount of 30 yuan/mt against Shanghai spot. The Shanghai-Guangdong price spread widened. Overall, the center of futures prices declined yesterday. Although some traders still had a strong reluctance to budge on prices, downstream purchasing enthusiasm slightly rebounded, with more spot pricing in the market. Some traders saw slightly better offloading in the morning session. Meanwhile, the price spread between futures contracts narrowed, and spot premiums and discounts increased.

Tianjin: Tianjin market was quoted at a discount of about 20 yuan/mt against Shanghai. Futures continued to decline, with many enterprises placing orders and inquiring about prices, but still holding bearish views. Actual trading fell short of expectations. Traders had a slight reluctance to budge on prices, leading to a small increase in premiums. Some traders focused on long-term contracts, with overall trading sluggish.

Ningbo: There was a premium of 10 yuan/mt against Shanghai spot for Qilin zinc ingot. It was expected to arrive mid-week, with some traders starting pre-sales. There was not much cargo in the market yesterday, but some downstream buyers had built up certain inventories through purchasing at lower prices last week, so their purchase willingness was not high yesterday. Overall, spot premiums remained stable.

Social Inventory: LME zinc inventory decreased by 3,825 mt to 97,000 mt on August 4, a decline of 3.79%. According to SMM's communication, as of August 4, the total zinc ingot inventory across seven locations tracked by SMM was 107,300 mt, an increase of 4,100 mt from July 31 and 3,600 mt from July 28, indicating an increase in domestic inventory.

Zinc Price Forecast: Overnight, LME zinc turned positive from bearish territory, with the 60-day moving average providing support below. Overnight, LME inventory fell again to below 100,000 mt, with the concentration of cancelled warrants increasing to over 47%. There was a high concentration of funds from major players, and at the same time, expectations for an interest rate cut on the macro front increased, causing LME zinc to halt its decline. Overnight, SHFE zinc recorded a bearish candlestick, with the 40-day moving average providing support below. Driven by the strength in the LME market, the center of SHFE zinc shifted upwards, with bears exiting the market. Attention should be paid to the support at the 22,000 yuan/mt integer level.

Data Source Disclaimer: 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.