Bears Increased Positions to Suppress, LME Zinc Plunged Downward [SMM Morning Meeting Minutes]

Zinc Morning Meeting Minutes for September 29

Futures: Last Friday, LME zinc opened at $2,924/mt, initially fluctuating around the daily average line. Approaching European trading hours, it touched a high of $2,933/mt, then bears increased positions, pressing LME zinc to plummet, with the center shifting down to around $2,890/mt, finally closing down at $2,886.5/mt, down $36/mt, a decrease of 1.23%. Trading volume decreased to 8,163 lots, while open interest increased by 2,312 lots to 219,000 lots. Last Friday, the most-traded SHFE zinc 2511 contract opened at 21,930 yuan/mt. Initially, bears increased positions, pressing SHFE zinc to decline along below the daily average line, with the center shifting down to 21,720 yuan/mt, finally closing down at 21,705 yuan/mt, down 275 yuan/mt, a decrease of 1.25%. Trading volume decreased to 87,654 lots, while open interest increased by 11,543 lots to 138,000 lots.

Macro:

Trump: If the government has to shut down, then shut it down; US August core PCE price index meets expectations; Richmond Fed President Barkin: Upcoming data will determine whether the US Fed should cut interest rates further; Hamas: Has not received a new ceasefire proposal, Israel-Palestinian negotiations are deadlocked; Iran rejects "uranium removal", UN confirms sanctions resolution on Iran has been reinstated; Fearing US invasion, Venezuela prepares emergency drills; National Bureau of Statistics (NBS): In August, profits of industrial enterprises above designated size turned to an increase of 20.4% YoY from a decrease of 1.5% in the previous month; PBOC Q3 regular meeting: Next stage suggests strengthening monetary policy adjustments, improving forward-looking, targeted, and effective nature.

Spot Market:

Shanghai: Last Friday, the refined zinc purchasing sentiment in Shanghai was 2.39, and the selling sentiment was 2.76. Entering the new long-term contract month, futures saw a slight rebound MoM. Some downstream users had completed previous stockpiling, so last Friday's transactions were mostly purchasing as needed for restocking. Spot trades showed mediocre performance, and traders' spot quotations held steady.

Guangdong: Last Friday, the refined zinc purchasing sentiment in Guangdong was 2.3, and the sales sentiment was 2.53. Overall, current continuous cargo pick-up by downstream users has led to some inventory reduction in Guangdong. Meanwhile, some enterprises were still conducting pre-holiday stockpiling. Last Friday, Guangdong premiums and discounts edged slightly higher.

Tianjin: Last Friday, the refined zinc purchasing sentiment in Tianjin was 2.31, and the selling sentiment was 2.37. Last Friday, zinc prices saw a slight rebound. Most downstream users had completed point-price stockpiling. With futures rising, purchasing enthusiasm was low. Traders had good sales earlier, market quotations were scarce, market prices held steady, and overall market transactions were average.

Ningbo: Few traders offered quotations in the Ningbo market, zinc ingot supply remained scarce, and spot quotations subsequently increased. Some downstream users maintained normal production during the National Day holiday and still inquired for purchasing and restocking, but due to limited supply, market transactions were sluggish.

Social Inventory: On September 25, LME zinc inventory decreased by 1,025 mt to 42,775 mt, a decline of 2.34%. According to SMM communication and understanding, as of September 25, the total SMM zinc ingot inventory across seven regions was 150,400 mt, down 8,000 mt from September 18 and 6,600 mt from September 22, indicating a reduction in domestic inventory.

Zinc Price Forecast: Last Friday, the LME zinc contract recorded a bearish candlestick, with support provided by the middle Bollinger Band. US inflation data largely met expectations, easing market concerns about a delayed US Fed interest rate cut due to excessive price pressure, while the US dollar fluctuated at highs. Last Friday, SHFE zinc recorded a bearish candlestick, encountering resistance from various moving averages above. Domestically, downstream enterprises reduced operations ahead of the holiday, while smelters resumed production in October after September maintenance, keeping production high and putting zinc prices under pressure.

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 constituting decision-making advice.