Expectations of interest rate cut strengthen, LME zinc continues to rise [SMM Zinc Morning Meeting Summary]

Zinc Morning Meeting Notes on August 13

Futures: Overnight, LME zinc opened at $2,809.5/mt. Initially, it dipped to $2,809/mt, then fluctuated upward, reaching a high of $2,854.5/mt near the close. It closed up at $2,848/mt, gaining $40/mt or 1.42%. Trading volume increased to 8,564 lots, while open interest decreased by 39 lots to 193,000 lots. Overnight, the most-traded SHFE zinc 2509 contract opened at 22,720 yuan/mt. Initially, it reached a high of 22,775 yuan/mt, then fluctuated downward, dipping to 22,630 yuan/mt. Subsequently, it oscillated below the daily average line, closing up at 22,685 yuan/mt, gaining 55 yuan/mt or 0.24%. Trading volume decreased to 42,749 lots, while open interest decreased by 1,609 lots to 85,879 lots.

Macro: US national debt exceeded $37 trillion for the first time; US July CPI annual rate was lower than expected, while the core CPI annual rate rose to a five-month high; Trump: Powell must cut interest rates now; US Treasury Secretary suggests Fed cut interest rates by 50 basis points in September; Trump's nominee for Commissioner of Labor Statistics proposes suspending monthly employment reports; White House: Trump may have plans to visit Russia in the future; For the first time in South Korea's constitutional history, "both a former president and his wife were arrested simultaneously"; Ministry of Finance, People's Bank of China, and Financial Regulatory Administration jointly issued the Implementation Plan for the Fiscal Subsidy Policy for Personal Consumer Loans; China Evergrande: Will be delisted starting at 9 a.m. on August 25; Kweichow Moutai: H1 net profit was 45.403 billion yuan, up 8.89% YoY; Cambricon: Information circulating online about the company placing a large order for carrier boards with a certain producer is false.

Spot Market:

Shanghai: Futures fluctuated at highs. Market traders focused on selling, and spot premiums remained weak. Although trading among market traders was active, downstream enterprises continued just-in-time procurement, and overall spot trading performance was average.

Guangdong: There was a spot discount of 20 yuan/mt against Shanghai spot. Overall, some traders' quotes remained high yesterday. Although futures opened slightly lower than the previous day on a MoM basis, downstream procurement enthusiasm remained low. Some traders continuously lowered premiums and discounts to sell, and spot premiums and discounts slightly decreased.

Tianjin: Tianjin reported a spot discount of 10 yuan/mt against Shanghai. Futures mainly fluctuated at highs. Downstream enterprises had low enthusiasm for just-in-time restocking procurement. Traders continued to lower premiums and discounts to sell. Some traders had delivery intentions but weak willingness to sell. Trading among traders dominated, and overall trading was sluggish.

Ningbo: There was a spot premium of 10 yuan/mt against Shanghai spot quotes. The Ningbo market had ample cargo supply, and there were certain differences in spot premium quotes. However, some traders continued to actively sell, with low-price premium quotes persisting. Downstream enterprises continued purchasing as needed, and spot trading performance was average.

Social inventory: On August 12, LME zinc inventory fell by 875 mt to 79,550 mt, a decrease of 1.09%. According to communication with SMM, as of August 11, the total zinc ingot inventory across seven locations tracked by SMM was 119,200 mt, an increase of 11,900 mt from August 4 and an increase of 6,000 mt from August 7, indicating a rise in domestic inventory.

Zinc price forecast: Overnight, LME zinc recorded a bullish candlestick, with the 20-day moving average providing support below. The US July CPI rose mildly, further supporting expectations for a US Fed interest rate cut in September. The US dollar index weakened, and coupled with the 90-day suspension of the implementation of 24% tariffs between China and the US, market sentiment was boosted, and LME zinc continued to rise. Overnight, SHFE zinc recorded a bearish candlestick, with the upper Bollinger Bands forming resistance. The positive macro sentiment in the market boosted SHFE zinc to open higher with a gap, but domestic zinc ingot inventory continued to build up. Driven by profits, smelters had high production enthusiasm. With a strong supply and weak demand in the fundamentals, SHFE zinc lacked upward momentum in the night session.

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.