US PMI Hits New High, Expectations for Interest Rate Cut Weaken; LME Zinc Declines [SMM Zinc Morning Meeting Summary]

SMM August 22 Zinc Morning Meeting Minutes
Futures: Overnight, LME zinc opened at $2,782.5/mt, initially oscillating around the daily moving average. During European trading hours, it touched a high of $2,790/mt. Subsequently, with increased short positions, LME zinc plunged, and its center pulled back, reaching a low of $2,760.5/mt during the night session. It finally closed down at $2,767/mt, a decrease of $19/mt or 0.68%. Trading volume increased to 7,299 lots, and open interest rose by 574 lots to 192,000 lots. The most-traded SHFE zinc 2510 contract opened at 22,215 yuan/mt, initially dropping to 22,230 yuan/mt, then oscillated near the daily moving average, and finally closed up at 22,250 yuan/mt, an increase of 10 yuan/mt or 0.04%. Trading volume decreased to 40,684 lots, and open interest increased by 452 lots to 111,000 lots.
Macro: US Department of Justice officials urged Powell to dismiss Governor Cook; Fed officials remain cautious about cutting interest rates, while candidates for the next Fed chairman call for significant rate cuts; the US S&P Global Composite PMI in August hit an 8-month high, leading traders to reduce bets on two rate cuts by the US Fed this year; Israeli Prime Minister Netanyahu: A ceasefire must be on terms acceptable to Israel; the US and EU formally finalised the framework of a trade agreement; the Trump administration is considering using $2 billion from the CHIPS Act to purchase key minerals related to chip production; a quasi-fiscal tool worth 500 billion yuan is set to be launched; China's monthly electricity consumption exceeded 1 trillion kWh for the first time.
Spot Market:
Shanghai: Yesterday morning, the futures market saw a slight rise compared to the previous day. Downstream enterprises continued to observe, making just-in-time procurement. Overall, transactions were worse MoM, but traders were active. Spot premiums remained weak.
Guangdong: Overall, the market center slightly increased yesterday. Some downstream enterprises had already made purchases and picked up goods the day before, leading to weaker spot transactions. Traders found it difficult to sell and slightly lowered premiums and discounts. Spot premiums and discounts declined yesterday.
Tianjin: The market slightly rebounded yesterday. Downstream enterprises had restocked more in the previous two days, resulting in a small destocking of zinc ingot inventory in Tianjin. Purchasing sentiment was weak yesterday, and traders maintained stable premiums. Overall, the market transactions were weaker than the previous day.
Ningbo: Long-term contract zinc ingots continued to arrive, ensuring ample supply in the Ningbo market. Traders actively offered quotes, but downstream enterprises, having previously purchased at lower prices, held some inventory. There was little inquiry for purchasing yesterday, and transactions were weak, with spot discounts remaining unchanged.
Social Inventory: On August 21, LME zinc inventory fell by 1,875 mt to 69,375 mt, a 2.63% decline. According to SMM, as of Thursday (August 21), the total zinc ingot inventory in seven locations was 132,900 mt, an increase of 3,700 mt from August 14, and a decrease of 2,600 mt from August 18, indicating a reduction in domestic inventory.
Zinc price forecast: Overnight, LME zinc recorded a small bearish candlestick, with the 10/20-day moving averages forming resistance above. The US S&P Global Composite PMI for August hit an 8-month high, leading traders to reduce their bets on two interest rate cuts by the US Fed this year, and the center of LME zinc prices moved downward. Overnight, SHFE zinc recorded a small bullish candlestick; domestic consumption remains relatively weak, but macro sentiment is positive, and there is still an optimistic expectation for macro policies, causing the center of SHFE zinc prices to edge up slightly.


Data source statement: Apart from publicly available information, other data are derived from public information, market exchanges, and SMM's internal database model, processed by SMM for reference only and do not constitute decision-making advice.