Driven by LME Gains, SHFE Zinc Center Moves Up [SMM Zinc Morning Comment]

Overnight, the LME zinc contract opened at $2,991/mt. In early trading, it consolidated around the daily average line before its center shifted upward to around $3,025/mt. Approaching the night session, bulls increased positions and rushed in, rapidly driving LME zinc higher to touch a high of $3,080/mt. Subsequently, bulls took profits and exited, leading LME zinc to record a "V"-shaped reversal. By the end of the session, the center pulled back to $3,015/mt, finally settling at $3,014/mt, up $19/mt, a gain of 0.63%. Trading volume increased to 22,259 lots, while open interest decreased by 4,049 lots to 220,000 lots. Overnight, LME zinc formed a bullish candlestick with a long upper shadow, supported below by the 10-day moving average. Global economic recovery, disruptions in supply of other metals, and a boost from rising gold prices have strengthened the overall non-ferrous metals trend. With zinc inventories at low levels, the backwardation structure widened to above 60. Driven by fund buying, zinc prices briefly broke through to a nearly 10-month high during the session. The domestic export window is nearing opening; attention should be paid to subsequent domestic export windows. If substantial exports occur, zinc prices may experience a pullback.

Overnight, the most-traded SHFE zinc 2511 contract opened higher with a gap at 22,465 yuan/mt. In early trading, it consolidated around the daily average line, touching a high of 22,515 yuan/mt during the period. Subsequently, its center slightly sank to around 22,400 yuan/mt, finally settling at the day's low of 22,335 yuan/mt, up 135 yuan/mt, a gain of 0.61%. Trading volume decreased to 9,753 lots, while open interest decreased by 4,768 lots to 108,000 lots. Overnight, SHFE zinc formed a bearish candlestick with no lower shadow, supported below by various moving averages. Overnight, SHFE zinc's center moved upward driven by the LME market. However, on the fundamentals side, October production rose to above 620,000 mt. After the holiday, both social inventory and smelter inventory saw a buildup. If significant domestic exports occur, SHFE zinc may maintain high levels; otherwise, there remains a risk of a pullback.

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