LME zinc inventory buildup surged, LME zinc weakened [SMM Morning Meeting Minutes]

SMM December 17:

Futures: Overnight, LME zinc opened at $3,085/mt. It briefly rose to a high of $3,098.5/mt in early trading, but then fluctuated downward as bulls reduced positions, eventually hitting a low of $3,033/mt towards the session close. It ended down $60/mt, or 1.94%, at $3,035/mt. Trading volume increased to 20,961 lots, while open interest fell by 3,203 lots to 233,000 lots. Overnight, the most-traded SHFE zinc 2602 contract opened at 23,005 yuan/mt. It briefly rose to a high of 23,025 yuan/mt in early trading, then fluctuated downward as bulls reduced positions, hitting a low of 22,860 yuan/mt towards the session close. It ended down 175 yuan/mt, or 0.76%, at 22,870 yuan/mt. Trading volume decreased to 55,403 lots, while open interest fell by 1,425 lots to 81,731 lots.
Macro:
The US November unemployment rate hit a four-year high; US media: Waller will be interviewed by Trump on Wednesday; US Treasury Secretary Besant: Speculation suggests the Fed Chairman appointment will be announced in early January next year; Trump will deliver a prime-time national address tomorrow, potentially previewing New Year policies; The US threatens retaliation against the EU's digital services tax plan; Central Financial Office: Expanding domestic demand is the top priority task for next year; NDRC: Vigorously enhance residents' consumption willingness, deeply implement actions to boost consumption.
Spot:
Shanghai: Yesterday, the refined zinc buying sentiment in Shanghai was 2.35, while the selling sentiment was 2.55. In the morning, zinc futures prices continued to pull back to around 23,000 yuan/mt. Since last night, some downstream enterprises placed orders at lower prices, and market inquiry and purchasing sentiment improved yesterday. Traders' spot offers remained high, spot premiums held steady, and trading among traders was active. Overall transaction volume improved MoM.
Guangdong: Yesterday, the refined zinc buying sentiment in Guangdong was 1.98, while the selling sentiment was 2.46. Guangdong switched to quoting for the new contract yesterday, changing from the 2601 to the 2602 contract. Additionally, the price center of zinc moved down yesterday. Driven by lower prices, downstream purchasing enthusiasm saw a slight rebound, and market activity improved.
Tianjin: Zinc prices continued to pull back yesterday. Some downstream users restocked on dips, but environmental protection alerts were issued again in Tianjin and Hebei, leading to moderate demand. Enterprises mainly conducted essential stockpiling, while traders raised their offers slightly. Trading among traders was active, and overall market transaction volume improved compared to the previous day.
Ningbo: Long-term contract zinc ingot volumes that arrived earlier are gradually being digested. Spot availability in the Ningbo market decreased MoM yesterday, with very few traders offering goods. Coupled with falling zinc futures prices, some downstream users placed orders at lower levels, pushing spot premiums higher.
Social Inventory: On December 16, LME zinc inventory increased by 31,075 mt or 48.2% to 95,550 mt. According to SMM communication, as of this Monday (December 15), domestic inventory decreased.
Zinc Price Forecast: Overnight, LME zinc recorded a large bearish candlestick, with resistance from the 5-day and 10-day daily average moving averages above. Macro sentiment weakened, LME inventory increased by 31,075 mt, and LME is expected to implement position limits on key contracts starting July 2026, prompting funds to roll over to distant months. LME zinc declined and is expected to be in the doldrums today. Overnight, SHFE zinc recorded a small bearish candlestick. Large overseas shipments to delivery warehouses eased tight sentiment driven by low inventory. Environmental protection alerts in many northern domestic regions dragged on consumption, but domestic zinc supply still provided support. SHFE zinc fell less than LME, and is expected to be in the doldrums today.

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