Fundamentals Remain in Surplus, SHFE Zinc in the Doldrums [SMM Zinc Morning Comment]

SMM September 22:

Last Friday, the LME zinc contract opened at $2,917/mt. During the morning session, it fluctuated at highs, touching a high of $2,926/mt. After entering the afternoon session, it declined all the way, hitting a low of $2,878/mt during the night session. At the end of the session, LME zinc rebounded slightly, finally closing down at $2,898.5/mt, down $14.5/mt, a decrease of 0.5%. Trading volume decreased to 9,867 lots, and open interest increased by 3,687 lots to 217,000 lots. Last Friday, LME zinc recorded three consecutive bearish candlesticks, with the 10-day daily average forming resistance. The US Fed cut interest rates as expected, and macro tailwinds were fully priced in. The US dollar index rose sharply, putting pressure on zinc prices. However, LME zinc inventory destocking continued, and with low inventory support, LME zinc is expected to have limited downside.

Last Friday, the most-traded SHFE zinc 2511 contract opened at 21,960 yuan/mt. It touched a high of 22,015 yuan/mt at the beginning of the session, then bears increased their positions, and SHFE zinc gradually moved lower. It then maintained fluctuate at lows, hitting a low of 21,890 yuan/mt during the session, and finally closed down at 21,905 yuan/mt, down 135 yuan/mt, a decrease of 0.61%. Trading volume increased to 63,497 lots, and open interest increased by 12,667 lots to 136,000 lots. Last Friday, SHFE zinc recorded a bearish candlestick, with the 5-day daily average forming resistance. The peak consumption season in September performed weakly, and the surplus logic in the domestic zinc market remained unchanged. Fundamentals continued to pressure zinc prices, and bears significantly increased their positions. SHFE zinc is expected to remain in the doldrums.