Macro Sentiment Drives LME Zinc to a Nearly Three-Year High [SMM Morning Meeting Minutes]

Zinc Morning Meeting Minutes for January 29

Futures: Overnight, LME zinc opened at $3,370/mt. It fluctuated near the daily average line initially, then edged up slightly. During European trading hours, it hit a high of $3,429/mt. Entering the night session, the price center gradually declined, eventually closing up at $3,375.5/mt, up $17/mt or 0.51%. Trading volume increased to 14,032 lots, while open interest decreased by 1,107 lots to 233,000 lots. Overnight, the most-traded SHFE zinc 2603 contract opened at 25,450 yuan/mt. It initially moved down along the daily average line, touched a low of 25,260 yuan/mt, then rose to a high of 25,515 yuan/mt before declining again. It finally closed up at 25,320 yuan/mt, up 105 yuan/mt or 0.42%. Trading volume decreased to 108,000 lots, and open interest fell by 2,429 lots to 116,000 lots.

Macro: Gold broke through $5,400 for the first time, surging $220 intraday, marking its largest single-day gain. The US Fed kept interest rates unchanged, with Powell advising his successor to stay away from politics. Besant stated that the US has long pursued a strong dollar policy and absolutely will not intervene in the yen. Trump warned that the next attack on Iran would be more severe, saying time is running out. The Bank of Ghana has sold part of its gold reserves to obtain foreign exchange. The Bank of Thailand set daily online gold trading limits and banned short selling. The State-owned Assets Supervision and Administration Commission is drafting a document to promote central state-owned enterprises in cultivating emerging pillar industries. The Shanghai Gold Exchange adjusted the margin levels and price limits for silver deferred contracts. The SHFE adjusted the price limits and trading margin ratios for related futures contracts on gold, silver, nickel, etc.

Spot Market:

Shanghai: The refined zinc purchase willingness in Shanghai was 1.94, while the sales willingness was 2.67. In the morning session, zinc prices surged again. Market traders actively offered and quoted, but downstream buyers were cautious due to high prices and mostly adopted a wait-and-see approach. Spot trading was sluggish. To secure deals, traders further lowered their spot quotes. Overall market trading was poor.

Guangdong: The refined zinc purchase willingness in Guangdong was 1.91, while the sales willingness was 2.50. Overall, end-users in Guangdong are gradually arranging holidays. Yesterday, zinc prices continued to rise, leading to sluggish market trading. However, traders maintained relatively high quotes. Suppressed by high prices, downstream enterprises had very low purchase willingness. Amid the sluggish trading, spot premiums/discounts declined.

Tianjin: The refined zinc purchase willingness in Tianjin was 1.81, while the sales willingness was 2.22. Yesterday, zinc prices rose sharply. Downstream buyers were cautious due to high prices, resulting in few inquiries. To facilitate sales, market traders slightly lowered their quotes. Trading was mainly among traders, and overall market trading was poor.

Ningbo: Market traders actively quoted and offered spot cargo. Spot premiums remained low. However, with futures prices rising significantly and downstream enterprises starting holidays gradually, downstream inquiries and purchases remained limited yesterday. Overall spot trades were sluggish. Social Inventory: On January 28, LME zinc inventory decreased by 175 mt to 111,375 mt, a decline of 0.16%. According to SMM communication and understanding, as of January 26, domestic inventory declined again.

Zinc Price Forecast: Overnight, LME zinc recorded a five-day winning streak, with the center of the daily candlestick moving upward. Due to escalating tensions in Iran, gold prices hit new highs, and aluminum and zinc prices rose significantly. As the US Fed kept interest rates unchanged, the US dollar index rebounded, narrowing the gains. Geopolitical risks require attention. Overnight, SHFE zinc recorded a small bearish candlestick, with the KDJ gap narrowing. Increased geopolitical uncertainty overnight led SHFE zinc to fluctuate at highs. The SHFE raised the price change limit to 9%, and the margin ratio was also raised to 10% and 11%. With high market enthusiasm, a significant short-term correction in zinc prices is unlikely.

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. They are for reference only and do not constitute decision-making advice.