Expectations of an interest rate cut boost zinc prices [SMM Morning Meeting Summary]

Zinc Morning Meeting Notes on August 7

Futures: Overnight, LME zinc opened at $2,752/mt. After briefly dipping to $2,743.5/mt at the start of the session, bulls increased their positions, pushing LME zinc to rise steadily above the daily average line. It reached a high of $2,803.5/mt during the night session, with the center consolidating near $2,790/mt. It eventually closed up at $2,795/mt, gaining $45/mt or 1.64%. Trading volume increased to 10,643 lots, while open interest rose by 162 lots to 191,000 lots. Overnight, the most-traded SHFE zinc 2509 contract opened at 22,480 yuan/mt. It quickly reached a high of 22,595 yuan/mt at the start of the session, but then fell below the daily average line as shorts entered and longs exited. It eventually closed up at 22,475 yuan/mt, gaining 145 yuan/mt or 0.65%. Trading volume decreased to 57,407 lots, while open interest increased by 1,590 lots to 95,844 lots.

Macro: Trump said the US-Russia talks were productive; Kashkari of the US Fed said a rate cut may be appropriate in the short term; Trump said the new Fed governor may be temporary; Trump proposed a 100% tariff on chips; the US increased the tariff rate on Indian goods to 50%; Indian media: Modi will visit China from August 31 to September 1.

Spot Market:

Shanghai: The futures market maintained a fluctuating trend in the morning session. There were many traders selling in the Shanghai market yesterday, and overall premiums were basically stable. However, some downstream enterprises had built up inventory by purchasing at lower prices earlier, so transactions remained just-in-time procurement-oriented yesterday, with trading mainly occurring between traders.

Guangdong: There was a discount of 40 yuan/mt against Shanghai spot. The Shanghai-Guangdong price spread remained stable. Overall, zinc prices rose slightly yesterday, but downstream procurement enthusiasm remained low, mostly just-in-time procurement. Market trading was sluggish. Traders slightly lowered premiums and discounts for selling yesterday, with premiums and discounts decreasing MoM.

Tianjin: Tianjin market was quoted at a discount of about 20 yuan/mt against Shanghai. The futures market mainly fluctuated. Downstream enterprises still focused on just-in-time restocking, with a bearish outlook and weak overall restocking willingness. Traders maintained stable selling compared to the previous day, with active trading among traders but generally average overall transactions.

Ningbo: Long-term contract zinc ingots arrived in the Ningbo market. Traders actively sold, with Ningbo spot premiums remaining stable yesterday. The futures market maintained a fluctuating trend. Downstream enterprises continued to wait and see, with spot transactions generally average.

Social Inventory: LME zinc inventory decreased by 3,050 mt to 89,225 mt on August 6, a decrease of 3.31%. According to SMM communication, as of August 4, the total zinc ingot inventory in seven regions tracked by SMM was 107,300 mt, an increase of 4,100 mt from July 31 and an increase of 3,600 mt from July 28. Domestic inventory increased.

Zinc Price Outlook: Overnight, LME zinc recorded a three-day winning streak, with the 40-day moving average providing support and the MACD bearish candlestick narrowing. Driven by the remarks of US Fed officials that boosted expectations of an interest rate cut, the US dollar index declined, and non-ferrous metals generally rose. Coupled with the continuous decline in LME inventory to less than 90,000 mt, LME zinc showed a strong trend. Overnight, SHFE zinc stopped rising and started to fall, but the center of the daily candlestick moved up, with the 10/20-day moving average forming resistance above. Driven by the overnight strength in LME, the center of SHFE zinc moved up, but with a relatively certain increase in supply, the upside room for zinc prices was constrained.

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.