LME backwardation structure remains high, LME zinc fluctuates at highs [SMM Morning Meeting Minutes]

Futures: Overnight, LME zinc opened at $3,026.5/mt. At the beginning of the session, bulls increased their positions, and LME zinc fluctuated upward, touching a high of $3,050/mt during European trading hours. Subsequently, bulls took profits, causing LME zinc to plunge and hit a low of $2,995/mt during the night session. It finally closed up at $3,019.5/mt, gaining $26/mt. The price center then slowly shifted upward, and it ultimately closed up at $3,022.5/mt, rising by $3/mt, an increase of 0.1%. Trading volume increased to 15,520 lots, and open interest rose by 300 lots to 222,000 lots. Overnight, the most-traded SHFE zinc 2512 contract opened at 22,245 yuan/mt. At the beginning of the session, SHFE zinc briefly touched a low of 22,215 yuan/mt. Subsequently, bears reduced their positions, and SHFE zinc fluctuated upward throughout the session. The closing price was also the intraday highest price, and it finally closed flat at 22,345 yuan/mt. Trading volume decreased to 57,310 lots, and open interest fell by 1,988 lots to 123,000 lots.
Macro:
Putin: The US intention appears more like postponing the summit rather than canceling it; US Department of Commerce official: There are no talks with Quantum Corporation about government equity participation; Japanese Prime Minister Kishi Sanae plans to speak with Trump around October 25; The CPC Central Committee will hold a press conference on the morning of the 24th; Ministry of Commerce: He Lifeng will lead a delegation to Malaysia for economic and trade consultations with the US.
Shanghai: At the end of the long-term contract period, zinc futures prices rose above 22,000 yuan/mt yesterday. Smelters showed a high willingness to sell, but downstream buyers remained cautious of high prices and purchased only as needed. Inquiries, purchases, and acceptance of goods were generally subdued, spot discounts remained in the doldrums, and overall trading was mostly among traders.
Guangdong: Yesterday, the purchasing sentiment for refined zinc in the Guangdong region was 2.07, while the sales sentiment was 2.38. Overall, as zinc prices rose yesterday, downstream purchasing enthusiasm decreased, with focus on receiving long-term contract goods and previously priced orders. Traders found it difficult to sell but were reluctant to lower premiums and discounts to facilitate sales. Spot premiums and discounts remained unchanged from the previous day.
Tianjin: Yesterday, the purchasing sentiment for refined zinc in the Tianjin region was 2.03, while the sales sentiment was 2.56. Zinc prices continued to rise yesterday, leading downstream buyers to be cautious of high prices and purchase sparingly. Inquiries were few, and the focus was on consuming existing inventory. Traders' offers held steady with minor adjustments, and trading was primarily among traders. Overall market transactions were poor.
Ningbo: Recently, spot cargoes in the Ningbo market have been scarce. Some downstream enterprises have started purchasing from the Shanghai market due to shortages. Yesterday, market offers remained limited, and spot premiums stayed high. Downstream enterprises actively inquired and accepted goods, with the undersupply of spot cargoes continuing.
Social inventory: On October 23, LME zinc inventory decreased by 600 mt or 1.7% to 34,700 mt. According to SMM communication, as of this Monday (October 23), the total zinc ingot inventory in seven regions tracked by SMM was 162,100 mt, down 600 mt from October 16 and down 3,200 mt from October 20. Domestic inventory increased.
Zinc Price Forecast: Overnight, LME zinc recorded a small bearish candlestick, with continued destocking in LME zinc. The backwardation structure of LME remained relatively high, indicating persistent risks. However, macro sentiment showed some uncertainty, and LME zinc is expected to fluctuate at highs today. Overnight, SHFE zinc recorded a bullish candlestick with no upper shadow. The stronger performance in LME continued to boost SHFE zinc prices. The market still holds policy expectations for the Fourth Plenary Session, supporting the rise in SHFE zinc. SHFE zinc is expected to fluctuate at highs 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. They are for reference only and do not constitute decision-making advice.