Expectations for Interest Rate Cuts Rise, LME Zinc Hits Near 5-Month High [SMM Morning Meeting Summary]

September 4 Zinc Morning Meeting Minutes

Futures: Overnight, LME zinc opened at $2,870/mt. Initially, LME zinc fluctuated around $2,865/mt. During the European trading session, increased long positions pushed LME zinc up to a high of $2,900/mt. Subsequently, with short positions entering and longs closing out, LME zinc dropped, forming a "V" shaped reversal, with the center returning to $2,865/mt. It finally closed at $2,869.5/mt, up $4/mt, or 0.14%. Trading volume increased to 14,264 lots, while open interest decreased by 866 lots to 196,000 lots. Overnight, the most-traded SHFE zinc 2510 contract opened at 22,240 yuan/mt. After quickly reaching 22,325 yuan/mt, increased short positions pressured SHFE zinc down, shifting the center to around 22,200 yuan/mt. It finally closed at 22,195 yuan/mt, down 110 yuan/mt, or 0.49%. Trading volume decreased to 61,576 lots, while open interest increased by 3,817 lots to 109,000 lots.

Macro: Several US Fed officials laid the groundwork for an interest rate cut, with the Beige Book showing that economic activity was basically flat; US job openings unexpectedly fell to their lowest level in nearly a year; India's commerce minister hopes to finalise a bilateral trade agreement with the US by November; OPEC+ is reportedly considering another increase in oil production at its Sunday meeting; Trump hinted at second and third phases of sanctions on Russian oil.

Spot Market:

Shanghai: In Shanghai yesterday, the purchase sentiment for refined zinc was 2.24, and the selling sentiment was 2.66. With some traders taking a rest, there were few buyers and sellers in the market. Given the fluctuating trend in futures, downstream buyers also showed low willingness to purchase, leading to sluggish overall market transactions. Spot premiums were in the doldrums.

Guangdong: In Guangdong yesterday, the purchase sentiment for refined zinc was 2.08, and the selling sentiment was 2.71. Overall, recent zinc prices maintained a fluctuating trend, with fewer downstream inquiries and purchases. Traders slightly lowered discounts to facilitate sales, but overall spot transactions remained mediocre. The price spread between futures contracts was basically flat compared to the previous day, and spot premiums and discounts continued to be in the doldrums.

Tianjin: In Tianjin yesterday, the purchase sentiment for refined zinc was 2.13, and the selling sentiment was 2.45. The futures mainly fluctuated, with weak demand and significant environmental protection impacts. Downstream players mostly observed, showing little procurement interest. Some traders took a rest, resulting in fewer quotations, and premiums remained stable. Overall, market transactions were poor.

Ningbo: Recently, the supply in the Ningbo market has been limited. Yesterday, traders' spot quotations continued to rise, with some divergence in pricing. However, with the futures also fluctuating, downstream buyers were not active, making just-in-time procurement. Overall, transactions were mediocre.

Social inventory: On September 3, LME zinc inventory decreased by 375 mt to 55,225 mt, down 0.67%, hitting a new low since May 2023. According to SMM communication, as of September 1, the total zinc ingot inventory across seven regions monitored by SMM reached 146,300 mt, up 7,800 mt from August 25 and 1,800 mt from August 28, indicating rising domestic inventory.

Zinc price outlook: Overnight, the LME zinc contract formed a bearish candlestick with a long upper shadow, supported by multiple moving averages below. Weak US employment data overnight boosted market expectations for interest rate cuts, pushing LME zinc to a near five-month high with an upward shift in its price center. The SHFE zinc contract also recorded a bearish candlestick with a long upper shadow overnight, while the KDJ indicator showed narrowing divergence. SHFE zinc maintained sideways movement overnight, with mixed expectations for the September peak consumption season. Low inventory provides bottom support, with short-term focus on capital flows. The medium and long-term view remains bearish.

Data source disclaimer: Except for publicly available information, other data are derived from public information, market exchanges, and processed by SMM based on its internal database model, for reference only and not constituting decision-making advice.