US ADP Employment Data Fell Short of Expectations, LME Zinc Center Shifted Lower [SMM Morning Meeting Minutes]

Futures: Overnight, LME zinc opened at $3,636/mt. At the beginning of the session, LME zinc fluctuated around the daily moving average. As European trading hours began, bulls increased their positions, and LME zinc oscillated higher to touch $3,658/mt. Prices at night session continued to pull back, dipping to $3,593/mt. Toward the end of the session, prices stopped falling and rebounded, partially recovering lost ground, ultimately closing lower at $3,603/mt, down $27.5/mt or 0.76%. Trading volume decreased to 88,462 lots, and open interest increased by 3,764 lots to 231,000 lots. Overnight, the most-traded SHFE zinc 2607 contract opened at 25,100 yuan/mt. At the beginning of the session, SHFE zinc surged to test 25,280 yuan/mt before coming under pressure and pulling back. It continued to weaken during the session, dipping to 25,005 yuan/mt. Toward the end of the session, prices rebounded slightly, recovering part of the losses, ultimately closing lower at 25,070 yuan/mt, down 80 yuan/mt or 0.32%. Trading volume decreased to 55,949 lots, and open interest decreased by 933 lots to 112,000 lots.

Macro: Iran's Supreme Leader approved the establishment of a working group on the Strait of Hormuz issue. Trump stated that a US-Iran deal could be reached by this weekend, that Iran had agreed not to pursue nuclear weapons, and that the maritime blockade on Iran could continue until US Labor Day. Iran outlined a four-stage plan for reaching a deal with the US. US Fed's Williams said there was currently no need to raise or cut interest rates and did not consider forward guidance particularly helpful. The Indian government clarified that reports about the central bank selling gold were untrue. Zelensky expressed willingness to negotiate directly with Putin immediately. According to CCTV Finance, fiber optic cable orders were booked through 2027, and top-tier players in China were accelerating self-developed optical preform R&D and capacity expansion.

Spot:

Shanghai: Yesterday, the purchase willingness for refined zinc in the Shanghai region was 1.8, and the shipments sentiment was 2.62. Zinc futures prices rose notably MoM, and downstream enterprises showed strong fear of high prices. There was virtually no inquiry-based consumption yesterday. Spot zinc ingot trades were sluggish. Traders lowered spot offer prices to sell, and spot discounts in the market widened slightly.

Guangdong: Yesterday, the purchase willingness for refined zinc in the Guangdong region was 1.69, and the sales sentiment was 2.45. Spot market trades were sluggish yesterday, with little actual transaction activity at high prices. End-use demand from downstream was weak, mostly relying on inventory drawdowns and monthly long-term contracts. Sporadic purchases at high prices were extremely low, overall purchase willingness was generally subdued, and spot premiums declined.

Tianjin: Yesterday, the purchase willingness for refined zinc in the Tianjin region was 1.71, and the shipments sentiment was 2.38. Zinc prices surged significantly, and downstream buyers were cautious about purchasing at high prices, with few inquiries. Traders kept shipment premiums stable. The market was relatively quiet, and overall market transactions were poor.

Ningbo: In the morning, zinc futures prices rose notably. Traders in the market adopted a laid-back approach to selling and quoting. Spot premiums declined only marginally. Downstream alloy plants showed poor purchase willingness yesterday due to fear of high prices, and spot trades in the market were sluggish.

Inventory: On June 3, LME zinc inventory decreased by 755 mt to 112,525 mt, a decline of 0.68%. According to SMM market communication, as of June 1, China's inventory increased by 3,700 mt to 264,600 mt.

Zinc price outlook: Overnight, LME zinc posted a bearish candlestick, with various moving averages providing support. The US-Iran negotiation impasse boosted the US dollar's continued strength, combined with US ADP employment data exceeding expectations, which raised inflation concerns and weakened expectations for US Fed interest rate cuts this year. The stronger US dollar pressured zinc prices, with LME zinc's overall center shifting downward. Overnight, SHFE zinc posted a small bearish candlestick with a long upper shadow, supported by various moving averages below. The decline in LME drove SHFE zinc's center downward. Currently, China's end-use consumption remains weak, with insufficient bottom support for zinc prices. However, tight ore supply and ongoing macro uncertainties are expected to keep SHFE zinc holding up well in the short term.

Data source disclaimer: Data other than public information is derived from public information, market communication, and SMM's internal database models, processed by SMM for reference only and does not constitute decision-making advice.