Escalating Middle East Tensions Sparked Market Concerns, LME Zinc Fell Under Pressure [SMM Zinc Morning Meeting Summary]

SMM Zinc Morning Briefing for July 14

Futures: Overnight, LME zinc opened at $3,602.5/mt, touched an intraday high of $3,605/mt early in the session, then drifted lower after the opening, hit a low of $3,556/mt near the close, and finally settled down $44.5/mt, or 1.23%, at $3,567/mt. Trading volume fell to 10,032 lots, and open interest decreased by 1,001 lots to 267,000 lots. Overnight, the most-traded SHFE zinc 2609 contract opened at 24,730 yuan/mt, edged lower with small fluctuations, touched a high of 24,785 yuan/mt early in the session and a low of 24,675 yuan/mt near the close, and ultimately settled down 70 yuan/mt, or 0.28%, at 24,690 yuan/mt. Trading volume decreased to 23,119 lots, while open interest increased by 2,483 lots to 84,109 lots.

Macro: The US will begin blockading Iranian ports at 4:00 a.m. on the 15th. Trump said on Monday ET that severe strikes against Iran would be carried out tonight and tomorrow, and that Gaoshan would be destroyed; a deal with Iran is possible. Multiple locations in Iran continued to be attacked, and Iran responded by striking US military facilities. Yemen’s Houthis also exchanged attacks with Saudi Arabia. Iran’s Foreign Ministry stated that the memorandum of understanding with the US has entered a “crisis” phase. Fed Governor Waller said that if core inflation runs hot this week, he would have to consider tightening monetary policy in the near term. The Bank of Korea expects the AI-driven chip “super cycle” to continue, dismissing concerns about peaking. The State Council approved the “15th Five-Year Plan for Expanding Consumption”: targeting total retail sales of consumer goods to reach around 60 trillion yuan by 2030.

Spot Market:

Shanghai: Yesterday, refined zinc buying sentiment in Shanghai was 1.92, and selling sentiment was 2.57. Yesterday morning, zinc futures edged lower, and some traders raised spot offers, but overall zinc prices did not fall to the psychological price levels of downstream enterprises, which remained mostly on the sidelines. Coupled with weak orders during the off-season, overall trading was moderate.

Guangdong: Yesterday, refined zinc buying sentiment in Guangdong was 1.98, and selling sentiment was 2.52. Zinc prices continued to consolidate at highs yesterday, and the overall spot market trading atmosphere was sluggish. Insufficient end-user orders left many downstream enterprises with rather negative buying sentiment. Market purchases were mainly need-based, and spot premiums were flat compared to last Friday.

Tianjin: Yesterday, refined zinc buying sentiment in Tianjin was 1.76, and selling sentiment was 2.55. Futures consolidated at highs yesterday, and downstream purchasing interest was low, with enterprises mainly consuming inventories. Traders’ selling premiums held steady, and trading was mainly between traders. Overall market transactions were poor yesterday.

Ningbo: Affected by the typhoon, some vessels are expected to be delayed in arriving at the Ningbo market. Yesterday, few traders were selling, but downstream enterprises still had some inventory on hand. Wait-and-see sentiment persisted yesterday, and spot trading was poor.

Social Inventory: On July 10, LME zinc inventory decreased by 525 mt to 114,275 mt, a decline of 0.46%; according to SMM communication, as of July 13, China's inventory edged up.

Zinc Price Forecast: Overnight, LME zinc recorded a bearish candlestick, with the 5-day moving average below providing support. Escalating tensions in the Middle East continued to heighten inflation concerns, and the US dollar index kept rising. LME zinc remained under pressure and continued to fall, with its center shifting lower. Overnight, SHFE zinc recorded a bearish candlestick, with the 60-day moving average below providing support. On the fundamentals side, downstream consumption in the off-season was sluggish. On Monday, SMM zinc ingot inventory increased again, and the decline in LME zinc dragged down SHFE zinc. During the night session, SHFE zinc's center continued to shift lower.

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