LME Zinc Retreats after Rapid Rise, Watch Macro Sentiment Changes [SMM Morning Meeting Summary]

July 24 Zinc Morning Meeting Summary

Futures: Overnight, LME zinc opened at $3,590/mt, then drifted higher along the daily moving average, with its center rising to around $3,610/mt for consolidation. Approaching the night session close, it touched a high of $3,621.5/mt, after which increased bearish positioning pressured LME zinc, sending it drifting lower to a low of $3,576/mt near the end. It finally closed down at $3,580/mt, a decline of $5/mt or 0.14%. Trading volume increased to 12,341 lots, and open interest rose by 929 lots to 249,000 lots. Overnight, the most-traded SHFE zinc 2609 contract opened at 24,825 yuan/mt. Initially, SHFE zinc moved around the daily average, touching a high of 24,880 yuan/mt, before bulls took profits and exited, pushing the price down to a low of 24,710 yuan/mt. Near the close, the price recovered slightly, finally settling down at 24,760 yuan/mt, a loss of 55 yuan/mt or 0.22%. Trading volume decreased to 44,632 lots, and open interest fell by 2,266 lots to 110,000 lots.

Macro: Trump: Is "seriously considering" resuming large-scale military operations against Iran, close to making a decision; Trump: Will use Iranian funds to compensate ship and cargo losses. The US imposed tariffs of 10%–12.5% on 60 economies. The White House was reported to seek the removal of Fed Governor Barr using the Silicon Valley Bank collapse report; US Treasury: Excessive fluctuations in the yen are unwelcome; The European Central Bank left interest rates unchanged as expected, but kept the door open for a rate hike in September; The People's Bank of China will conduct 500 billion yuan MLF operations today with a one-year term; The Ministry of Commerce: China and the US are soliciting opinions on tariff reduction arrangements and will push for implementation as soon as possible.

Spot Market:

Shanghai: Shanghai's refined zinc buying sentiment was 1.96, and selling sentiment was 2.60. Yesterday, SHFE zinc futures prices continued to rise, and downstream enterprises, fearing high prices, reduced inquiries. Overall spot transactions were sluggish. Traders lowered spot quotes to facilitate sales, and market premiums slipped yesterday.

Guangdong: Guangdong's refined zinc buying sentiment was 1.90, and selling sentiment was 2.45. Yesterday, futures prices rose, end-users showed fear of high prices, and combined with downstream demand in the off-season, market trading weakened. Spot premiums lacked upward momentum and remained at deep discounts.

Tianjin: Tianjin's refined zinc buying sentiment was 1.91, and selling sentiment was 2.52. Yesterday, futures prices surged, end-use consumption remained poor, and downstream buyers were cautious due to high prices with low purchasing enthusiasm. Traders slightly lowered premiums on sales, and overall market transactions were moderate.

Ningbo: In the morning, SHFE zinc futures prices rose again, and some traders lowered spot quotes to sell. However, downstream manufacturers in Ningbo had poor orders, and yesterday they mostly stayed on the sidelines due to fear of high prices, leaving overall spot trades sluggish.

Social Inventory: On July 23, LME zinc inventory decreased by 1,575 mt to 106,075 mt, a decline of 1.46%; according to SMM communication, as of July 23, China's inventory increased by 1,400 mt to 270,400 mt.

Zinc Price Outlook: Overnight, LME zinc recorded a bearish candlestick with a long upper shadow, but its center shifted upward, with moving averages below providing support. Overnight, affected by tensions between the US and Iran, the US dollar index fell first and then rose; LME zinc retreated after a rapid rise, but its overall performance remained strong, mainly due to the continuous decline in LME inventory, with the LME Cash-3M backwardation structure widening to $41.92/mt. Subsequent attention should be paid to actual export volumes. Overnight, SHFE zinc stopped rising and started to fall, with the KDJ indicator gap widening upward. Overnight, the escalation of geopolitical conflicts in the Middle East triggered concerns about inflation and economic downturn. Meanwhile, China's social inventory increased again, and poor consumption also put pressure on the upside. Zinc prices mainly traded in a range.

Data Source Statement: Other than public information, all other data are processed by SMM based on public information, market communication, and relying on SMM's internal database models. They are for reference only and do not constitute decision-making advice.