Supply-Side Support Strengthens, Zinc Prices Fluctuate at Highs [SMM Morning Meeting Minutes]

December 1 Morning Zinc Meeting Summary

Futures: Last Friday, LME zinc opened at $3,025/mt. With short positions reducing and exiting, LME zinc fluctuated upward. Despite a brief dip during the European trading session, it continued to rise, with the center moving up to around $3,050/mt by the end of the day. It closed at $3,051/mt, up $29/mt, or 0.96%. Trading volume increased to 9,061 lots, while open interest decreased by 2,655 lots to 220,000 lots. The most-traded SHFE zinc 2601 contract opened at 22,450 yuan/mt. After briefly touching 22,380 yuan/mt, it operated above the daily average line, closing at 22,470 yuan/mt, up 115 yuan/mt, or 0.51%. Trading volume decreased to 43,107 lots, while open interest increased by 798 lots to 102,000 lots.

Macro: Trump: Revoke all documents signed by Biden through an automatic signature device; Trump: Do not overinterpret the US move to close Venezuelan airspace; US-Ukraine new round of talks concluded, Rubio called productive but emphasized more work to be done; OPEC+ agreed to maintain production stability for the entire group next year, eight major oil producers reaffirmed the suspension of production increases in Q1 next year; Ministry of Commerce: Initiate final review investigation on anti-dumping measures for imported polyphenylene sulfide from the US, Japan, South Korea, and other countries; National Bureau of Statistics (NBS): Manufacturing PMI rose to 49.2%, indicating some improvement in business conditions.

Spot Market:

Shanghai: In the Shanghai area, the refined zinc purchasing sentiment was 2.40, and the selling sentiment was 2.47. There were few traders offering spot cargoes in the Shanghai market last Friday, and spot premiums remained stable. Although futures pulled back MoM, they did not reach the downstream psychological price level, leading enterprises to mostly observe, with overall transactions showing no improvement compared to the previous day.

Guangdong: In the Guangdong area, the refined zinc purchasing sentiment was 2.15, and the selling sentiment was 2.41. Overall, the zinc price center pulled back slightly last Friday, but the change from the beginning of the week was relatively small. Some end-users had already made purchases earlier, and with many traders offering spot cargoes, transactions became increasingly difficult. Mainstream brands started to offer discounts in the second period, and market transactions were relatively average.

Tianjin: In the Tianjin area, the refined zinc purchasing sentiment was 2.27, and the selling sentiment was 2.55. Last Friday, the zinc price dropped back slightly, mainly fluctuating. It did not reach the downstream psychological price level, but as the weekend approached, some enterprises restocked out of necessity, while large factories awaited long-term contract deliveries. Traders' quotes remained stable, and overall market transactions were average.

Ningbo: Spot zinc in Ningbo remained scarce, with traders' quotes largely stable compared to the previous day. Although the zinc price declined in the morning, downstream enterprise demand was weak, and zinc ingot transactions were still based on need. Overall, there was no significant improvement in trading compared to the previous day.

Social Inventory: On November 28, LME zinc inventory increased by 950 mt to 51,750 mt, up 1.87%. According to SMM communication, as of November 27, the total zinc ingot inventory in seven SMM-tracked regions was 148,100 mt, down 4,600 mt from November 20 and 2,900 mt from November 24, indicating a decrease in domestic inventory.

Zinc Price Forecast: Last Friday, the LME zinc contract recorded a bullish candlestick, with support from the 5-day and 40-day daily averages and an expanding KDJ gap. The US dollar index was in the doldrums last Friday, coupled with increased market expectations for a US Fed interest rate cut in December, LME zinc fluctuated at highs. Last Friday, SHFE zinc recorded a long lower shadow bullish candlestick, with resistance from the 20-day daily average and support from the 5-day and 10-day daily averages. According to SMM, refined zinc production in November fell by 22,000 mt MoM, exceeding expectations, and the decline continued in December, with overall production decreasing significantly. Supply-side support for zinc prices strengthened, and social inventory continued to decline, zinc prices held up well.

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 do not constitute decision-making advice.