Bulls Exit, LME Zinc Drifts Lower [SMM Morning Meeting Summary]

Zinc Morning Meeting Minutes for July 20

Futures: Last Friday, LME zinc opened at $3,574.5/mt. After briefly touching a high of $3,583/mt at the start of the session, bulls took profits and exited, pushing LME zinc to slide below the daily average line, hitting a low of $3,500.5/mt during the night session. The price center then shifted back up near the daily average line towards the close, ultimately settling down at $3,528/mt, a loss of $53/mt or 1.48%. Trading volume increased to 13,664 lots, while open interest decreased by 622 lots to 254,000 lots. Last Friday, the most-traded SHFE zinc 2609 contract opened at 24,370 yuan/mt. After a brief rally early in the session, bears added positions to pressure it, sending the contract drifting lower to a low of 24,235 yuan/mt. Subsequently, bears reduced their positions and exited, allowing it to drift higher, with its price center moving above the daily average line. It eventually closed down at 24,400 yuan/mt, a decline of 210 yuan/mt or 0.85%. Trading volume decreased to 62,739 lots, while open interest increased by 888 lots to 96,298 lots.

Macro: Iran's Deputy Foreign Minister stated that Iran has ceased fulfilling the US-Iran memorandum of understanding; Trump responded he "doesn't care." An advisor to Iran’s Supreme Leader said that if US military operations continue, Iran may shift to a full-scale offensive phase. US media reports indicate that amid intensifying US-Iran conflict, the Pentagon is accelerating the deployment of additional F-16 and F-35 fighter jets to the Middle East. The US military claimed over the weekend that several soldiers were killed in the Middle East. Houthi forces stated they would issue a statement on the 20th to announce an important position. Iranian media reported that shipping traffic through the Strait of Hormuz has dropped to zero. The State-owned Assets Supervision and Administration Commission of the State Council urged central state-owned enterprises to continuously tackle original technologies like basic algorithms, physical AI, intelligent computing chips, and quantum communication. The China Securities Regulatory Commission will hold a symposium on the 20th to promote stable and healthy market development.

Spot Market:

Shanghai: SHFE zinc futures prices maintained a fluctuating trend. Traders in the Shanghai market continued to hold prices firm for their shipments, leading to a further rise in overall spot premium quotes. However, downstream enterprises showed poor initiative in making inquiries and purchasing, resulting in last Friday’s spot transactions remaining need-based and sluggish overall spot trades.

Guangdong: The purchasing sentiment for refined zinc in the Guangdong region was 2.06, and the selling sentiment was 2.54. A slight pullback in the futures price center, combined with the approaching weekend, spurred some minor purchasing activity among downstream users, which drove spot premiums in Guangdong slightly higher last Friday.

Tianjin: The purchasing sentiment for refined zinc in the Tianjin region was 1.83, while the shipment sentiment was 2.56. The futures market pulled back slightly last Friday, but due to very poor end-use consumption, downstream users mainly restocked to meet rigid demand, with a small volume of price-point transactions. Trader shipment premiums remained stable, and overall market transactions were poor that day.

Ningbo: Quotes in the overall Ningbo market were relatively chaotic. Some traders displayed a sentiment to hold prices firm, significantly raising their spot premium quotes. However, downstream enterprise orders were poor, and last Friday’s inquiries and purchases were again average, keeping overall transactions largely need-based.

Social Inventory: On July 17, LME zinc inventory decreased by 150 mt to 111,725 mt, a decline of 0.13%. According to SMM's communication, as of July 16, China's inventory decreased by 1,300 mt to 267,700 mt.

Zinc Price Forecast: Last Friday, LME zinc recorded a bearish candlestick with a long lower shadow, with the 60-day moving average below providing support, and the MACD turned into a bearish candlestick. Last Friday, the US dollar strengthened, LME zinc bulls exited, and overall it was in the doldrums. Going forward, attention should be paid to the geopolitical situation in the Middle East. Last Friday, SHFE zinc stopped its decline and turned positive, but the daily candlestick center shifted downward. Last Friday, SHFE zinc was in the doldrums. In the off-season for consumption, downstream enterprises had low acceptance of high zinc prices, and the center of SHFE zinc was under pressure.

Data Source Disclaimer: Data other than publicly available information are processed by SMM based on public information, market communication, and SMM's internal database models, for reference only and do not constitute decision-making advice.