Macro and fundamentals resonate, driving the center of LME zinc prices higher [SMM Morning Meeting Summary]

Zinc Morning Meeting Notes on August 8

Futures: Overnight, LME zinc opened at $2,795/mt. After a brief consolidation along the daily average line in the early session, LME zinc rose steadily above the daily average line, hitting a high of $2,825.5/mt during European trading hours. Subsequently, under selling pressure and profit-taking, LME zinc fluctuated downward, with the center moving below the daily average line. It recovered slightly at the end of the session, closing up at $2,815.5/mt, up $20.5/mt or 0.73%. Trading volume increased to 10,672 lots, and open interest increased by 2,082 lots to 193,000 lots. Overnight, the most-traded SHFE zinc 2509 contract opened at 22,525 yuan/mt. After a quick drop to 22,435 yuan/mt in the early session, the center moved up near the daily average line. At the end of the session, the center slightly rose, closing down at 22,510 yuan/mt, down 20 yuan/mt or 0.09%. Trading volume decreased to 39,622 lots, and open interest decreased by 723 lots to 96,096 lots.

Macro: The US reciprocal tariff officially took effect, with a one-kilogram gold bar subject to additional taxes upon import; Trump nominated Stephen Milan as a Fed governor; Russian presidential aide: The goal is to hold a Russia-US summit next week; Bank of England cuts interest rates by 25 basis points, forced to vote twice for the first time; PBOC increased gold reserves for the ninth consecutive month.

Spot Market:

Shanghai: Spot zinc prices rose significantly compared to the previous day. Downstream orders were weak, and purchase willingness was low. Coupled with the high futures prices dampening buying sentiment, downstream buyers made fewer inquiries for purchases yesterday. Traders continued to lower premium quotes to facilitate sales, but enterprises mostly maintained just-in-time demand, with transactions mainly occurring among traders.

Guangdong: Spot discounts to Shanghai were 40 yuan/mt, and the Shanghai-Guangdong price spread remained unchanged. Overall, zinc prices rose MoM yesterday, with downstream buyers exhibiting strong fear of high prices. Coupled with the current general end-use consumption, enterprises lacked purchasing motivation. Guangdong's inventory gradually increased, while spot circulation was abundant. Under weak demand, spot premiums and discounts continued to decline.

Tianjin: Tianjin reported discounts of around 20 yuan/mt to Shanghai amid futures price rally. Downstream buyers were cautious about purchasing due to fear of high prices, with fewer inquiries and lower purchasing enthusiasm. Traders continued to lower premiums and discounts to facilitate sales, with transactions mainly occurring among traders. Overall, trading volume deteriorated.

Ningbo: Spot zinc prices rose significantly. Traders in the Ningbo market actively sold yesterday, with spot premiums declining significantly MoM. Some downstream buyers made purchases based on just-in-time demand, but transactions were mostly settled at a later price, with overall trading performance being average.

Social Inventory: LME zinc inventory decreased by 4,275 mt to 84,950 mt on August 7, a decline of 4.79%. According to SMM communication, as of August 7, the total zinc ingot inventory across seven locations tracked by SMM was 113,200 mt, an increase of 10,000 mt from July 31 and an increase of 5,900 mt from August 4, indicating an increase in domestic inventory.

Zinc Price Forecast: Overnight, LME zinc recorded a four-day winning streak, with the bearish candlestick on the MACD narrowing and the center of the daily candlestick moving upwards. Overnight, Trump's nomination of a new governor raised market expectations for an interest rate cut, and the meeting between Putin and Trump sparked market expectations for a ceasefire in the Russia-Ukraine conflict. Meanwhile, LME inventory once again fell below 85,000 mt, and LME zinc held up well. Overnight, SHFE zinc stopped rising and started to fall, with various moving averages below providing support. Domestic supply growth is relatively certain, with social inventory increasing to 113,200 mt, and zinc prices encountering resistance above.

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.