Bears Increased Positions at Highs, LME Zinc Retreats After Rapid Rise [SMM Morning Meeting Minutes]

Zinc Morning Meeting Minutes for December 3

Futures: Overnight, LME zinc opened at $3,084/mt. Initially, it fluctuated around the daily average line. During European trading hours, after touching a high of $3,105/mt, bears sold heavily at high levels, causing LME zinc to fluctuate downward. It finally closed down at $3,055.5/mt, falling $35.5/mt, a decrease of 1.15%. Trading volume decreased to 10,631 lots, while open interest increased by 2,708 lots to 221,000 lots. Overnight, the most-traded SHFE zinc 2601 contract opened at 22,745 yuan/mt. During the session, SHFE zinc consolidated around the daily average line, touching a high of 22,800 yuan/mt and a low of 22,700 yuan/mt. It finally closed up at 22,715 yuan/mt, rising 10 yuan/mt, an increase of 0.04%. Trading volume decreased to 52,529 lots, while open interest decreased by 1,272 lots to 105,000 lots.

Macro: Trump actively hinted at Hassett as the next Fed Chairman; Putin threatened to cut off Ukraine's sea routes, vowing to intensify strikes on Ukrainian facilities and ships; Ukraine denied Russian control of the key city of Pokrovsk; PBOC's net injection via open market government bond transactions in November was 50 billion yuan.

Spot Market:

Shanghai: The refined zinc purchase sentiment in Shanghai was 2.32, and the sales sentiment was 2.5. Yesterday, zinc futures prices rose significantly. Downstream buyers were cautious of high prices, leading to reduced inquiries and purchases. Spot purchasing was sluggish. However, some traders continued purchasing, resulting in active trading among traders. With limited available cargo, zinc ingot premiums over the average price remained high.

Guangdong: The refined zinc purchase sentiment in Guangdong was 2.04, and the sales sentiment was 2.48. Overall, yesterday, the price center rose again. Downstream enterprises showed insufficient purchasing enthusiasm, and traders found it difficult to sell. To facilitate deals, they slightly lowered premiums/discounts, leading to a decrease in spot premiums/discounts.

Tianjin: The refined zinc purchase sentiment in Tianjin was 2.12, and the sales sentiment was 2.53. Yesterday, zinc prices continued to rise. Downstream buyers were cautious of high prices and purchased cautiously, with few inquiries for fixed-price orders. Some enterprises waited for long-term contract deliveries. Meanwhile, circulating zinc ingots in the Tianjin market remained limited. Traders showed a tendency to hold prices firm in their quotes. Overall market transactions were poor.

Ningbo: The market was mainly focused on selling. Some traders were indifferent about selling, maintaining high spot premium quotes. Although futures prices rose significantly, some downstream buyers still made purchases as needed, mostly based on later pricing. Overall transactions worsened.

Social Inventory: On December 2, LME zinc inventory increased by 350 mt to 52,375 mt, up 0.67%. According to SMM communication, as of December 1, the total zinc ingot inventory in seven SMM-tracked regions was 144,300 mt, decreasing by 6,800 mt compared to November 24 and by 3,800 mt compared to November 27. Domestic inventory decreased.

Zinc Price Forecast: Overnight, the LME zinc contract recorded a long upper shadow bearish candlestick, with the KDJ gap expanding downward. Due to a stronger US dollar, LME zinc retreated after a rapid rise overnight but overall continued to fluctuate at highs, with limited downside room for zinc prices. Overnight, SHFE zinc stopped rising and started to fall, but the center of the daily candlestick moved upward, encountering resistance from the upper Bollinger Band. On the supply side, zinc fundamentals provide strong bottom support, but weak consumption keeps prices under pressure. In the short term, zinc prices are expected to fluctuate at highs.

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 intended as decision-making advice.