PPI data posts largest increase in three years; LME zinc falls first, then rises [SMM Zinc Morning Meeting Summary]

Zinc Morning Meeting Notes on August 15

Futures: Overnight, LME zinc opened at $2,818/mt. After opening, LME zinc fluctuated along the daily average line, hitting a low of $2,810.5/mt during the session. It then fluctuated upward, reaching a high of $2,851/mt near the end of the session, closing up at $2,842.5/mt, up $31/mt. Trading volume increased to 7,717 lots, while open interest decreased by 588 lots to 194,000 lots. Overnight, the most-traded SHFE zinc 2510 contract opened at 22,500 yuan/mt. In the early session, SHFE zinc hit a low of 22,500 yuan/mt. After opening, it fluctuated considerably around the daily average line, reaching a high of 22,600 yuan/mt during the night session. It then pulled back again to near the daily average line, closing up at 22,570 yuan/mt, up 75 yuan/mt or 0.33%. Trading volume decreased to 30,792 lots, while open interest increased by 4,772 lots to 87,974 lots.

Macro: US PPI rose 0.9% MoM in July, the largest increase in three years; US Treasury Secretary Bessent: It is unlikely to reassess the US gold reserve holdings and will stop selling Bitcoin holdings; Fed officials refuted expectations of a significant interest rate cut in September; Trump: This meeting with Putin laid the foundation for a second meeting, and if the issues are not resolved, sanctions will be imposed; Russian President Putin: It is possible to reach a new arms agreement with the US; The Fed's overnight reverse repo facility usage hit a new low since April 2021; It is reported that the Trump administration is discussing taking a stake in Intel; The PBOC will conduct a 500 billion yuan outright reverse repo operation today; The Hong Kong Securities and Futures Commission and the Hong Kong Monetary Authority issued a joint statement on market volatility related to stablecoins; CK Hutchison's latest statement: It is expected that the port transaction will not be completed this year, and mainland investors will be invited to join.

Spot Market:

Shanghai: Yesterday's futures closed slightly lower than the previous day. There were not many traders selling in the Shanghai market, but downstream enterprises continued to wait and see. Spot procurement remained just-in-time, and trading did not see significant improvement. Spot premiums were in the doldrums.

Guangdong: There was a discount of 20 yuan/mt against Shanghai spot. Although there was a slight decline in the futures yesterday, the market trading atmosphere remained weak. Under the off-season, downstream procurement enthusiasm remained low, and enterprises mainly focused on just-in-time procurement and placing orders. Inventories in the Guangdong region have continued to increase recently, while consumption enthusiasm is insufficient. It is expected that premiums and discounts will continue to fluctuate in the short term.

Tianjin: There was a discount of 10 yuan/mt against Shanghai in Tianjin. Yesterday's futures declined, and some downstream enterprises restocked at low prices. However, some small enterprises were concerned about subsequent production restrictions and had weak purchase willingness. As the delivery date approached, some traders had willingness to transfer to delivery warehouse and weak willingness to sell. Overall trading improved compared to the previous day.

Ningbo: There was a premium of 10 yuan/mt against Shanghai spot. Recently, traders in the Ningbo market have been actively offering shipments and quotations, while downstream buyers have been cautious about purchasing due to high prices, only meeting their rigid demand. Although the futures market declined slightly yesterday, there was no significant improvement in trading volume. Traders' quotations also remained low, and spot premiums were basically stable.

Social inventory: On August 14, LME zinc inventory decreased by 1,025 mt to 77,450 mt, a decline of 1.31%. According to communication with SMM, as of August 14, the total zinc ingot inventory across seven locations tracked by SMM was 129,200 mt, an increase of 16,000 mt from August 7 and 10,000 mt from August 11, indicating a continuous rise in domestic inventory.

Zinc price forecast: Overnight, LME zinc recorded a bullish candlestick, with the 20-day moving average providing support below. US PPI data for July showed the largest increase in three years, and hawkish remarks from the US Fed resurfaced, causing the US dollar index to rebound from its lows. Investors remained cautious, but with LME zinc inventory continuing to decline, the low inventory level provided some support for zinc prices. LME zinc initially fell but then rose, with the overall center basically stable. Overnight, SHFE zinc recorded a bullish candlestick, with the 5-day moving average acting as resistance above. On Thursday, domestic zinc ingot inventory increased by 10,000 mt MoM to 129,000 mt, with the inventory growth trend continuing. However, supported by the rebound in LME zinc prices, SHFE zinc maintained a fluctuating trend during the night session.

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.