US Fed Cuts Interest Rate as Expected, LME Zinc Declines [SMM Morning Meeting Minutes]

SMM Zinc Morning Meeting Minutes, September 18
Futures: Overnight, LME zinc opened at $2,983.5/mt. It fluctuated around the daily average line in early trading, then fluctuated upward and touched a high of $2,998.5/mt during European trading hours. Subsequently, bears increased their positions, and LME zinc fluctuated downward all the way, hitting a low of $2,937/mt at the end of the session. It finally closed up at $2,943/mt, down $41.5/mt, a decrease of 1.39%. Trading volume increased to 14,598 lots, and open interest increased by 229 lots to 216,000 lots. Overnight, the most-traded SHFE zinc 2511 contract opened at 22,215 yuan/mt. In early trading, bears reduced their positions, and SHFE zinc plunged downward to a low of 22,095 yuan/mt. It then fluctuated around 22,138 yuan/mt and finally closed down at 22,120 yuan/mt, down 165 yuan/mt, a decrease of 0.74%. Trading volume decreased to 43,725 lots, and open interest increased by 4,580 lots to 98,723 lots.
Macro:
The US Fed announced a 25 basis point interest rate cut, with the median dot plot suggesting a cumulative three rate cuts this year. Powell stated that risks to the labour market are tilted to the downside, and this rate cut can be understood as a risk management cut. US Treasury Secretary Besant once listed two properties simultaneously as "primary residences," consistent with the reason for Cook's dismissal. The Bank of Canada cut interest rates by 25 basis points and removed forward guidance on rate cuts from its policy statement. The EU announced sanctions against Israel. Saudi Arabia and Pakistan signed a joint defense agreement. Ministry of Finance: Securities transaction stamp tax revenue from January to August was up 81.7% YoY. Lee Ka-chiu: Promote Hong Kong as an international gold trading market and expand gold storage.
Shanghai: Yesterday, the refined zinc procurement sentiment in the Shanghai region was 2.36, and the sales sentiment was 2.85. In the morning, futures dropped back slightly but did not reach the psychological price level of downstream enterprises. Downstream enterprises still maintained a strong wait-and-see sentiment yesterday. Although some traders reported that sales improved MoM, the extent was relatively limited. Downstream maintained just-in-time procurement purchases, and spot premiums struggled to rise.
Guangdong: Yesterday, the refined zinc procurement sentiment in the Guangdong region was 2.14, and the sales sentiment was 2.51. Overall, zinc prices pulled back slightly in early trading yesterday, and downstream enterprises restocked in small quantities at low prices. Although enterprises still had a strong sentiment to drive down prices, spot transactions improved slightly compared to the previous day. However, as prices rebounded later, market transactions weakened again.
Tianjin: Yesterday, the refined zinc procurement sentiment in the Tianjin region was 1.93, and the sales sentiment was 2.65. Zinc prices dropped back slightly yesterday, and some downstream enterprises made fixed-price purchases at low levels for restocking, but still mainly for just-in-time needs. Traders' sales remained stable, and overall market transactions were sluggish.
Ningbo: Yesterday, many traders offered quotes for sales in the Ningbo market. The overall quotation level was basically flat compared to the previous day. Downstream zinc alloy plants had mediocre order performance, and with some previously locked-price zinc ingots still available, raw material inventory levels were sufficient. Procurement purchases were basically on-demand, and spot transactions showed mediocre performance.
Social Inventory: On September 17, LME zinc inventory remained flat at 48,975 mt. According to SMM communication, as of this Monday (September 15), the total SMM zinc ingot inventory across seven regions was 160,600 mt, up 8,500 mt from September 8 and 6,400 mt from September 11, indicating an increase in domestic inventory.
Zinc Price Forecast: Overnight, the LME zinc contract recorded a large bearish candlestick. The US Fed announced a 25-basis-point interest rate cut, largely in line with expectations. However, funds exhibited some risk-off sentiment ahead of the meeting. The still-tight LME zinc inventory provided some support. LME zinc is expected to be in the doldrums today. Overnight, SHFE zinc recorded a large bearish candlestick. On the macro front, the US Fed cut interest rates as expected, while domestic inventory buildup continued. Diverging trends between SHFE and LME have drawn market attention to the opening of the zinc ingot export window. Expectations of a domestic surplus persist. SHFE zinc is expected to trade mainly within a range today.

Data Source Statement: Except for publicly available information, other data are processed by SMM based on public information, market communication, and SMM's internal database model, for reference only and not as decision-making advice.