LME zinc inventory continues to decline, with LME zinc prices remaining high [SMM Zinc Morning Meeting Summary]

Zinc Morning Meeting Notes on August 11

Futures: On Friday, LME zinc opened at $2,819.5/mt. After opening, LME zinc fluctuated rangebound around the daily average line. It then rose slightly before falling again below the daily average line. After touching a low of $2,804.5/mt, LME zinc rebounded again, reaching a high of $2,834.5/mt near the close. It finally closed up at $2,834/mt, rising by $18.5/mt or 0.66%. Trading volume decreased to 8,402 lots, while open interest increased by 1,092 lots to 194,000 lots. On Friday, the most-traded SHFE zinc 2509 contract opened at 22,485 yuan/mt. In the early session, SHFE zinc touched a low of 22,425 yuan/mt, then fluctuated upward, and oscillated around 22,570 yuan/mt, reaching a high of 22,595 yuan/mt. It finally closed up at 22,555 yuan/mt, rising by 40 yuan/mt or 0.18%. Trading volume decreased to 41,432 lots, while open interest decreased by 590 lots to 94,305 lots.

Macro: Trump and Putin will meet in Alaska, US, on August 15, possibly involving a "territorial exchange". Netanyahu: The next phase of the IDF's military operations will focus on two locations still under Hamas control. Trump plans to take action against the IRS and intends to appoint a senior critic to head the Bureau of Labor Statistics. US Treasury Secretary Bessent: Trade issues are expected to be resolved by the end of October. Trump said Armenia and Azerbaijan have committed to "permanently" halting fighting, while Iran vows to block the "US corridor" in the Caucasus region. Sources: India has "compromised" and is willing to reduce oil imports from Russia. National Bureau of Statistics (NBS): China's CPI remained flat YoY in July, while rising by 0.4% MoM. The decline in PPI narrowed for the first time since March. China Railway Group established a new Tibet Railway Company with a capital of 95 billion yuan. Beijing adjusted its real estate policy, lifting restrictions on the number of homes that eligible families can purchase outside the Fifth Ring Road.

Spot Market:

Shanghai: At the end of last week, zinc futures prices maintained a high level. With continuous inventory buildup of zinc ingots in Shanghai, the overall supply was abundant. Traders' spot premiums remained unchanged, while downstream buyers remained cautious due to high prices, resulting in poor purchase willingness. Spot transactions were still driven by rigid demand, with trading mainly occurring among traders.

Guangdong: It was at a discount of 30 yuan/mt to Shanghai spot. On Friday, zinc prices maintained a fluctuating trend, with the center slightly declining. Delivery brands continued to refuse to budge on prices, while non-delivery spot premiums continued to decline due to difficulties in selling. Driven by some enterprises choosing to restock slightly on Friday, market transactions improved slightly, but overall remained relatively sluggish. Spot premiums and discounts rose slightly.

Tianjin: It was at a discount of 10 yuan/mt to Shanghai spot. Futures prices continued to fluctuate mainly. Downstream buyers still restocked based on rigid demand, with low purchase enthusiasm. Traders continued to lower premiums and discounts to sell, with trading mainly occurring among traders. Overall transactions were sluggish.

Ningbo: Spot premiums against Shanghai spot cargo were 20 yuan/mt. The futures market fluctuated at highs, and market traders continued to actively sell. Spot premiums remained stable compared to last Thursday, but downstream buyers were hesitant to inquire due to high prices, and orders were weak during the off-season. As a result, spot trades in Ningbo were mediocre last Friday.

Social inventory: On August 8, LME zinc inventory decreased by 3,450 mt to 81,500 mt, a drop of 4.06%. According to communication with SMM, 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 a buildup in domestic inventory.

Zinc price outlook: Last Friday, LME zinc recorded a bullish candlestick, with the 10-day moving average providing support. Expectations for US Fed interest rate cuts continued to boost market sentiment, and the US dollar index continued to weaken. Additionally, the continuous drawdown in LME zinc inventory to a year-to-date low supported the high-level operation of LME zinc. Last Friday, SHFE zinc also recorded a bullish candlestick, with the middle Bollinger Band forming resistance. The rise in the LME market continued to boost SHFE zinc prices, but the continuous inventory buildup in zinc ingot social inventory during the domestic off-season and the ongoing supply-strong, demand-weak fundamental pattern maintained a fluctuating trend in SHFE zinc.

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.