Futures bulls exited, LME zinc center moved lower [SMM Morning Meeting Minutes]

January 8 Zinc Morning Meeting Summary

Futures: Overnight, LME zinc opened at $3,246.5/mt, initially maintaining a fluctuating trend and reaching a high of $3,258.5/mt. After entering the European trading session, prices began to decline, hitting a low of $3,153/mt. Although there was a slight rebound, it failed to reverse the downward trend, closing at $3,160/mt, down by $85.5/mt, or 2.63%. Trading volume increased to 128,000 lots, while open interest decreased by 1,964 lots to 234,000 lots. The most-traded SHFE zinc 2602 contract opened lower with a gap at 24,190 yuan/mt, initially surging to 24,230 yuan/mt, then started to decline, reaching a low of 24,045 yuan/mt. Despite a minor rebound, it could not recover the losses, ending the session in a low-level fluctuation, closing at 24,130 yuan/mt, down by 200 yuan/mt, or 0.82%. Trading volume fell to 62,977 lots, and open interest decreased by 684 lots to 90,919 lots.

Macro: Zelensky stated that the Russia-Ukraine conflict may end in H1 2026; sources: Venezuela will supply oil to the US indefinitely; US Secretary of State: talks on Greenland issues with Denmark next week; strike at Chile's Mantoverde copper mine to continue; PBOC to conduct 1,100 billion yuan in buyout reverse repos today; PBOC increases gold reserves for the 14th consecutive month; SHFE makes latest adjustments concerning silver futures.

Spot:

Shanghai: Yesterday, the purchasing sentiment for refined zinc in Shanghai was 2.1, and the selling sentiment was 2.48. With zinc prices fluctuating at highs, the market in Shanghai still had limited supply, and overall premiums and discounts hovered at highs. Downstream buyers remained cautious, mostly purchasing lower-priced factory-delivered zinc ingots, and transactions were mainly between traders.

Guangdong: Yesterday, the purchasing sentiment for refined zinc in Guangdong was 1.98, and the selling sentiment was 2.68. Overall, although zinc prices did not continue to rise, they still fluctuated at highs, and market activity was relatively sluggish. However, as inventories in Guangdong gradually declined, traders held firm on prices, and spot premiums and discounts continued to increase.

Tianjin: Yesterday, the purchasing sentiment for refined zinc in Tianjin was 1.82, and the selling sentiment was 2.09. With zinc prices fluctuating at highs, downstream buyers were cautious and made few purchases. Some small factories planned to take breaks mid-month and stopped buying. Traders' quotes were disorganized, and premiums slightly stabilized, leading to a sluggish market overall.

Ningbo: Recently, the price spread between zinc and aluminum has narrowed significantly, compressing the profit margins of zinc alloy manufacturers, reducing their willingness to purchase zinc ingots. Coupled with zinc prices fluctuating at highs, the market maintained a demand-driven transaction pattern. Today, spot premiums and discounts pulled back slightly but the decrease was limited.

Inventory: On January 7, LME zinc inventory decreased by 275 mt to 105,775 mt, a drop of 0.26%. According to SMM communication, as of this Monday (January 5), domestic zinc ingot inventory increased.

Zinc Price Forecast: Overnight, the LME zinc contract recorded a large bearish candlestick, with support provided by the 10-day and 60-day daily average lines below. Yesterday, the US dollar index fluctuated higher, while the market gradually digested recent macro disturbances, leading to a significant exit of bulls. The LME zinc ended its five-day winning streak, with its center moving lower. Overnight, SHFE zinc recorded a bearish candlestick, supported by the middle Bollinger Band below. Recent domestic end-use consumption performance has been mediocre, providing insufficient support for prices. Meanwhile, SHFE zinc moved lower in sync with the decline in LME zinc.

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.