Weak domestic fundamentals capped the upside of SHFE zinc [SMM Morning Meeting Summary]

Zinc Morning Meeting Minutes on September 1

Futures: Last Friday, LME zinc opened at $2,789/mt, initially fluctuating around the daily average line. During European trading hours, bulls increased positions, pushing the price center up to $2,810/mt. Entering the night session, LME zinc edged slightly higher, touching a high of $2,836/mt before closing at $2,814/mt, up $27/mt (0.97%). Trading volume rose to 13,170 lots, while open interest fell by 226 lots to 191,000. The most-traded SHFE zinc 2510 contract opened at 22,250 yuan/mt, briefly hitting 22,300 yuan/mt before retreating to fluctuate near 22,170 yuan/mt, ultimately closing at 22,175 yuan/mt, up 80 yuan/mt (0.36%). Trading volume decreased to 70,485 lots, while open interest increased by 890 lots to 117,000.

Macro: US federal appeals court rules Trump's tariff measures illegal; Ukraine plans new deep strikes inside Russia; Key figures killed, Houthis vow revenge; Israel reportedly considers annexing West Bank; Swiss gold industry lobby opposes relocating capacity to US; ECB officials keep door open for further rate cuts; China's August manufacturing PMI at 49.4; CSRC: Continue consolidating capital market recovery; State Council studies pilot work on comprehensive market-oriented reform of production factors.

Spot market:

Shanghai: Last Friday, refined zinc buying sentiment in Shanghai was 2.4, while selling sentiment was 2.85. Although zinc futures prices continued slight declines, downstream buyers had mostly completed pricing on Thursday, resulting in weaker purchasing sentiment Friday. Traders also faced sluggish sales, with spot premiums struggling to rise. Overall spot trading underperformed Thursday.

Guangdong: Spot discounts to Shanghai narrowed to 10 yuan/mt. Buying sentiment for refined zinc in Guangdong was 2.21, selling sentiment 2.79. Zinc prices maintained fluctuating trends Friday. Some downstream users had restocked Thursday, leading to reduced procurement enthusiasm. Fewer traders were active due to month-end settlements, creating relatively muted market activity with declining spot premiums/discounts.

Tianjin: Tianjin spot prices showed discounts of around 20 yuan/mt versus Shanghai. Buying sentiment was 2.39, selling sentiment 2.73. While futures continued pulling back, restocking demand was limited after Thursday's active pricing. Traders maintained stable premiums with active inter-trader dealings, though overall market turnover weakened compared to Thursday.

Ningbo: Fewer traders offered spot zinc Friday with limited availability. Market quotes showed divergence, but some downstream buyers had secured substantial Thursday purchases, maintaining inventory levels. Enterprises made just-in-time procurement Friday, resulting in generally subdued spot trading.

Social inventory: On August 29, LME zinc inventory decreased by 1,500 mt to 56,500 mt, a 2.59% decline. According to SMM communication, as of August 28, the total zinc ingot inventory across seven SMM-monitored regions stood at 144,500 mt, up 11,600 mt from August 21 and 6,000 mt from August 25, indicating an increase in domestic inventory.

Zinc price outlook: Last Friday, LME zinc recorded a long upper-shadow bullish candlestick, supported by the 10/40 daily average moving averages. The LME zinc center rose last Friday amid a weaker US dollar, US interest rate cut expectations, and peak season demand anticipation. SHFE zinc recorded five consecutive bearish candles last Friday, capped by the 10-day moving average and supported by the lower Bollinger Band. Driven by the LME, SHFE zinc's center edged up slightly, but high production from domestic smelters and continuous social inventory buildup partially limited its gains.

Data source statement: Except for 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 not constituting decision-making advice.