US Dollar Strong, LME Zinc in the Doldrums [SMM Morning Meeting Minutes]

June 25 Zinc Morning Briefing

Futures: Overnight, LME zinc opened at $3,492/mt, fluctuated around the daily moving average in early trading, touched a high of $3,507/mt during the European session, and then came under pressure from increased bearish positions, pulling back in steps to a low of $3,404/mt in the night session. Towards the close, LME zinc attempted to break higher but was capped by the daily moving average and pulled back again, eventually settling down at $3,408/mt, down $93.5/mt or 2.67%. Trading volume increased to 19,785 lots, and open interest rose by 325 lots to 266,000 lots. Overnight, the most-traded SHFE zinc 2608 contract opened lower with a gap at 24,025 yuan/mt, initially fluctuated along the lower band of the daily moving average and traded above it, touched a high of 24,195 yuan/mt, then saw its center shift lower toward the daily moving average as bears added and longs liquidated, hitting a low of 23,935 yuan/mt, and finally settled down at 24,045 yuan/mt, down 325 yuan/mt or 1.33%. Trading volume decreased to 79,256 lots, and open interest increased by 2,118 lots to 103,000 lots.

Macro: Bessent stressed the critical importance of US dollar dominance; the US and Iran will continue technical consultations at month-end; the oil market is beginning to show signs of short-term oversupply, with stranded tankers leaving the Strait of Hormuz; Israel again hardened its stance, stating it will not withdraw from Lebanon; the central bank will conduct a 500 billion yuan one-year MLF operation.

Spot Market:

Shanghai: Refined zinc purchase sentiment in Shanghai stood at 2.22, with sales sentiment at 2.72. Futures zinc prices declined notably, prompting downstream enterprises to start buying on dips overnight. However, some downstream enterprises continued to expect further declines and mostly stayed on the sidelines. The improvement in spot trading in the morning fell short of expectations. Market traders actively offered and quoted, with spot premiums edging up.

Guangdong: Refined zinc purchase sentiment in Guangdong was 2.2, and sales sentiment was 2.4. The pullback in futures prices yesterday supported spot premiums modestly, leading to increased point-price purchasing by end-users. Demand slightly recovered, underpinning higher spot premiums.

Tianjin: Refined zinc purchase sentiment in Tianjin was 2.13, and sales sentiment was 2.65. The pullback in futures prices yesterday prompted more dip buying and restocking by downstream buyers. Market trading sentiment improved. Traders raised their shipment premiums slightly, and overall market transactions improved from the previous day.

Ningbo: Futures zinc prices dropped significantly to below 24,500 yuan/mt. In the morning, most traders raised spot quotes, driving premiums higher. Downstream enterprises actively sought bargains. Overall spot trades improved from the previous day.

Social Inventory: On June 24, LME zinc inventory decreased by 325 mt to 122,825 mt, down 0.26%. According to SMM, as of June 22, China’s inventory increased by 7,200 mt to 275,200 mt.

Zinc Price Forecast: Overnight, LME zinc recorded a large bearish candlestick, the daily candlestick center moved lower, and the MACD bearish candlestick expanded. Affected by the strengthening US dollar and navigation in the Strait of Hormuz, non-ferrous metals were in the doldrums, and the LME zinc center moved lower. Overnight, SHFE zinc recorded a small bullish candlestick, but the daily candlestick center moved lower, with the lower Bollinger Band above forming suppression, and the KDJ opening expanded downward. Overnight, non-ferrous metals fell broadly, and zinc prices followed the decline. Fundamentals side, as TCs fell, smelter losses expanded, but no significant production cuts have occurred yet. Combined with weakening downstream purchasing enthusiasm during the off-season, zinc prices fluctuated downward, and focus on support at the integer level of 24,000 yuan/mt.

Data Source Statement: Data other than publicly available information is processed by SMM based on public information, market communications, and relying on SMM's internal database models, for reference only and not constituting any decision-making advice.