Increase in Inventory and Rise in US Dollar Index, LME Zinc Continues to Pull Back [SMM Morning Meeting Minutes]

Futures: Overnight, LME zinc opened at $3,162.5/mt. At the beginning of the session, the price center rose, touching a high of $3,186/mt, then continued to decline, probing a low of $3,123/mt, and finally closed down at $3,131/mt, down $29/mt, a decrease of 0.92%. Trading volume increased to 131,708 lots, while open interest decreased by 1,208 lots to 232,790 lots. Overnight, the most-traded SHFE zinc 2602 contract opened at 23,960 yuan/mt. Early in the session, the price briefly surged, touching a high of 23,990 yuan/mt, then fell as bulls reduced positions, probing a low of 23,750 yuan/mt. During the session, a reduction in bear positions led to a slight rebound in SHFE zinc, and it finally closed down at 23,800 yuan/mt, down 175 yuan/mt, a decrease of 0.73%. Trading volume decreased to 61,828 lots, while open interest decreased by 3,928 lots to 79,858 lots.

Macro: US Fed Governor's latest remarks: Expect 150 basis points in interest rate cuts this year; CME raised performance bonds for precious metal futures inter-delivery spreads and related spread contracts; US media reported that Trump hopes to lower oil prices to $50 per barrel; US side discussed paying $10,000-$100,000 to buy off Greenland residents; US Embassy warned: Ukraine could suffer a large-scale air strike in the coming days; Industry insider: SAMR held talks with 6 PV leaders and industry associations; Sinopec and China National Aviation Fuel implemented a reorganization.

Spot:

Shanghai: Yesterday, the purchasing sentiment for refined zinc in the Shanghai area was 2.18, while the selling sentiment was 2.51. As zinc ingots arrived gradually, inventory in the Shanghai market continued to increase. Traders mainly sold, but downstream demand was weak in the off-season, and spot transactions were sluggish. Yesterday, spot premiums were adjusted down MoM. Overall trading in Shanghai remained mostly between traders.

Guangdong: Yesterday, the purchasing sentiment for refined zinc in the Guangdong area was 1.95, while the selling sentiment was 2.66. Overall, the zinc price center dropped back slightly yesterday, but prices remained relatively high. Downstream purchasing enthusiasm was low. Market inquiries were numerous, but transactions were mainly between traders. However, Guangdong inventory continued destocking, and coupled with a widening price spread between futures contracts, spot premiums and discounts held steady compared to the previous day.

Tianjin: Yesterday, the purchasing sentiment for refined zinc in the Tianjin area was 1.85, while the selling sentiment was 2.14. The zinc price dropped back slightly yesterday but still did not reach downstream psychological price levels. Downstream restocked only for rigid demand, with minimal purchasing. Traders' offers were slightly lowered, while premiums held steady slightly. Overall market transactions were sluggish.

Ningbo: In the morning session, zinc futures prices retreated from highs. Some traders raised their spot offers, leading to higher spot premiums in Ningbo. Due to poor orders, downstream enterprises showed low sentiment for inquiries and purchases yesterday. Overall spot transactions showed no significant improvement.

Inventory: On January 8, LME zinc inventory increased by 2,500 mt to 108,000 mt, up 2.37%. According to SMM communication, as of this Thursday (January 8), domestic zinc ingot inventory increased.

Zinc Price Forecast: LME zinc recorded a bearish candlestick overnight, with the upper Bollinger Band exerting pressure above and the 20/60-day daily averages providing support below. Although some US Fed officials have recently adopted a more dovish stance, increased overseas zinc inventory combined with a continuous rise in the US dollar index pushed the center of LME zinc lower. SHFE zinc also recorded a bearish candlestick overnight, with the upper Bollinger Band applying downward pressure. Post-holiday domestic social inventory continued to increase, market consumption remained moderate, spot cargo transactions were primarily driven by rigid demand, and weak fundamentals provided insufficient support for zinc prices, leading to a lower center for SHFE zinc.

Data Source Statement: Data not derived from public information are processed by SMM based on public information, market communication, and SMM's internal database model, and are for reference only, not constituting decision-making advice.