Zinc LME Outperforms SHFE as SHFE/LME Price Ratio Declines Further [SMM Morning Meeting Summary]

September 2 Zinc Morning Meeting Summary

Futures: Overnight, LME zinc opened at $2,818.5/mt. Initially, LME zinc oscillated around the daily average line. During European trading hours, its center moved up to $2,835/mt, hitting a high of $2,840/mt. Entering the night session, the center dropped below the daily average line before bulls pushed it back above the line, finally closing up at $2,833/mt, a gain of $19/mt or 0.68%. Trading volume decreased to 7,410 lots, and open interest increased by 1,018 lots to 193,000 lots. Overnight, the most-traded SHFE zinc 2510 contract opened at 22,175 yuan/mt. After briefly hitting 22,250 yuan/mt early, its center dropped to around 22,195 yuan/mt and finally closed up at 22,195 yuan/mt, a gain of 20 yuan/mt or 0.09%. Trading volume decreased to 36,354 lots, and open interest decreased by 1,043 lots to 115,000 lots.

Macro: Trump said India proposed to reduce tariffs on US goods to zero but it was too late; Trump may declare a national housing emergency this fall; Bessent said Milan is likely to take office before the September US Fed meeting; Markets expect OPEC+ may pause production increases at this week's meeting; Houthi forces released a list of 12 senior members killed in strikes; Xi Jinping: Accelerate the establishment of the Shanghai Cooperation Organization Development Bank.

Spot Market:

Shanghai: Yesterday, Shanghai's refined zinc purchasing sentiment was 2.35, and willingness to sell was 2.77. Few traders offered for sale, and those who did were reluctant to sell at low prices, leading to strong reluctance to budge on prices. Premiums over the average price continued to widen. However, as futures zinc prices rebounded slightly on a daily basis in the morning session, downstream enterprises conducted just-in-time procurement, resulting in sluggish trading in the Shanghai market.

Guangdong: Yesterday, Guangdong's refined zinc purchasing sentiment was 2.17, and selling sentiment was 2.87. Overall, as the futures center moved higher, downstream purchasing enthusiasm was low, with most being just-in-time procurement. Traders struggled to sell, but some were unwilling to lower premiums and discounts, leading to sluggish spot transactions.

Tianjin: Yesterday, Tianjin's refined zinc purchasing sentiment was 2.32, and willingness to sell was 2.64. Futures continued to trade in the doldrums, but many downstream enterprises halted production, leaving most with no procurement needs. Affected by downstream shutdowns, some traders did not quote prices, while others rolled over contracts. Overall, spot premiums held steady, but market transactions were poor.

Ningbo: Over the weekend, Qilin zinc ingots arrived in Ningbo. Yesterday, traders in the Ningbo market continued to raise spot quotes, with some divergence in pricing. As futures rebounded slightly, downstream enterprises made just-in-time purchases, resulting in average spot transaction performance.

Social inventory: On September 1, LME zinc inventory decreased by 625 mt to 55,875 mt, down 1.11%. According to SMM communication, as of September 1, the total zinc ingot inventory across seven SMM-tracked regions stood at 146,300 mt, up 7,800 mt from August 25 and 1,800 mt from August 28, indicating rising domestic inventory.

Zinc price outlook: LME zinc posted a three-day winning streak overnight, with the center of daily candlestick rising and multiple moving averages providing support below. Overnight, the US dollar index declined amid heightened expectations for US Fed interest rate cuts and independence concerns, coupled with continuous LME inventory drawdowns. The LME 0-3 backwardation structure widened to 14.9, with increased fund concentration, driving LME zinc to fluctuate upward. SHFE zinc ended its losing streak and turned positive overnight, with the KDJ indicator expanding upward. Domestic social inventory rose again, lacking upward momentum. With LME outperforming SHFE, the SHFE/LME price ratio further corrected downward. Zinc prices are expected to remain range-bound, with attention on overseas geopolitical developments and fund flows.

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.