Structural Risks Weaken, LME Zinc Maintains Fluctuating Trend [SMM Morning Meeting Minutes]

Zinc Morning Meeting Minutes for November 3

Futures: Last Friday, LME zinc opened at $3,046.5/mt. Initially, it moved down along the daily average line, touching a low of $3,020.5/mt during European trading hours. Subsequently, bears took profits and exited, causing LME zinc to rise rapidly and hit a high of $3,070/mt during the night session. By the end of the session, the price center pulled back to consolidate near the daily average line, finally closing up at $3,050/mt, up $5.5/mt, a gain of 0.18%. Trading volume decreased to 8,918 lots, and open interest fell by 43 lots to 222,000 lots. Last Friday, the most-traded SHFE zinc 2512 contract opened at 22,425 yuan/mt. After a brief dip at the start, its price center moved above the daily average line, reaching a high of 22,540 yuan/mt during the session, and finally closed up at 22,455 yuan/mt, up 105 yuan/mt, a gain of 0.47%. Trading volume decreased to 64,816 lots, and open interest fell by 1,174 lots to 115,000 lots.

Macro: Trump denied having decided to launch a military strike against Venezuela; several US Fed officials opposed an interest rate cut in December; CNN: The US Department of Defense approved providing long-range Tomahawk missiles to Ukraine, with the final decision-making authority transferred to Trump; Peskov: No rush to hold a "Putin-Trump meeting," details need careful preparation; OPEC+ decided to increase production by 137,000 barrels per day in December and pause increases in Q1 next year; Gold funds saw a record outflow of $7.5 billion in the week ending last Wednesday; State Council executive meeting: Deployed measures to accelerate scenario cultivation and opening to promote large-scale application of new scenarios; US Treasury Secretary said the China-US trade agreement could be signed as early as this week; National Development and Reform Commission (NDRC): Arranged 500 billion yuan from the local government debt balance limit to supplement local government comprehensive financial resources and expand effective investment; Ministry of Finance and State Taxation Administration issued an announcement on tax policy related to gold.

Spot Market:

Shanghai: The purchasing sentiment for refined zinc in Shanghai was 2.22, while the selling sentiment was 2.45. On the last day of the month-end, market supply was limited, traders continued to hold prices firm, and spot premiums continued to rise. Downstream buyers continued purchasing zinc ingots delivered from plants at low prices. Trading in the Shanghai market was mostly among traders.

Guangdong: The purchasing sentiment for #0 zinc in Guangdong was 1.95, while the sales sentiment was 2.43. Overall, spot market trading was relatively subdued last Friday. Downstream purchasing enthusiasm was low, trader selling was average, major brands showed low willingness to sell at low prices, and spot premiums and discounts remained flat compared to last Thursday.

Tianjin: The purchasing sentiment for refined zinc in Tianjin was 1.93, while the selling sentiment was 2.37. Last Friday, zinc prices continued to fluctuate at highs. Some downstream users conducted necessary stockpiling for the weekend, while large plants mainly relied on long-term contracts. Traders generally kept their offers steady, with trading primarily among traders. Overall market trading was poor.

Ningbo: Yongchang zinc ingot arrived in Ningbo, market quotations from traders remained scarce, spot premiums continued to rise. However, some downstream users continued to pick up goods from pre-sold zinc ingots, showing low purchase willingness for spot cargo, resulting in relatively sluggish spot market transactions.

Social Inventory: On November 2, LME zinc inventory increased by 400 mt to 35,300 mt, up 1.15%. According to SMM communication, as of October 30, the total zinc ingot inventory in seven regions tracked by SMM was 161,500 mt, decreasing by 700 mt compared to October 23 and by 2,000 mt compared to October 27, indicating a reduction in domestic inventory.

Zinc Price Forecast: Last Friday, LME zinc recorded a small bullish candlestick, encountering resistance from the 5-day moving average above while finding support from the 10-day moving average below. The LME zinc center slightly declined due to a stronger US dollar last Friday, with the LME Cash-3M backwardation structure pulling back below $100/mt, reducing structural risks and putting LME zinc under pressure. Last Friday, SHFE zinc recorded a long upper shadow bullish candlestick, supported by various moving averages below. Last Friday, domestic TCs declined again, and smelter production in November is expected to continue decreasing due to raw material impacts. Combined with export expectations leading to tight supply, SHFE zinc has strong bottom support.

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.