LME zinc ingot inventory continued to decrease, and LME zinc rose significantly [SMM Zinc Morning Briefing]

SMM Zinc Morning Briefing for August 6

Futures: Overnight, LME zinc opened at $3,662/mt and rose steadily. Early in the session it dipped to $3,655.5/mt, and late in the session it peaked at $3,748/mt, before closing up at $3,745.5/mt, up $84.5/mt or 2.31%. Trading volume increased to 13,736 lots, and open interest fell by 1,162 lots to 247,000 lots. Overnight, the most-traded SHFE zinc 2609 contract opened at 25,425 yuan/mt, dipped to 25,405 yuan/mt in early trading, briefly consolidated higher, peaked at 25,680 yuan/mt, then retreated from highs to near the daily moving average and moved sideways around that level. It closed up at 25,645 yuan/mt, up 220 yuan/mt or 0.87%. Trading volume rose to 87,032 lots, and open interest increased by 3,879 lots to 124,000 lots.

Macro: US July ADP payrolls hit a new low since the start of the year. The US Treasury maintained its quarterly debt issuance scale unchanged. Iranian Foreign Ministry said it was close to reaching a strait agreement with Oman. Yemen’s Houthi forces again claimed an attack on a Saudi oil tanker. China’s Ministry of Commerce retaliated against a series of US negative measures concerning China. ChangXin refused Apple’s push for lower prices, saying it cannot be lower than Samsung Electronics and SK Hynix.

Spot Market:

Shanghai: Yesterday, the purchase sentiment for refined zinc in Shanghai was 1.88, and the sales sentiment was 2.65. SHFE zinc futures prices rose again above 25,000 yuan/mt yesterday. Downstream enterprises showed strong fear of high prices, resulting in generally weak purchase willingness and sluggish spot trades of zinc ingot. However, traders in the Shanghai market offered limited shipments, keeping overall spot quotations firm.

Guangdong: Yesterday, the purchase sentiment for refined zinc in Guangdong was 1.75, and the sales sentiment was 2.64. Futures prices moved higher, intensifying downstream fear of high prices. Purchases were mostly limited to essential restocking in small volumes. Meanwhile, ample inventories at some producers and weak end-use consumption jointly suppressed market buying, leaving spot premiums lacking upward momentum.

Tianjin: Yesterday, the purchase sentiment for refined zinc in Tianjin was 1.81, and the sales sentiment was 2.45. Futures surged to levels that downstream users found hard to bear, so they were wary of high prices and cautious in purchasing, with limited inquiries. The export window opened, and traders traded actively. Spot premiums for sales remained largely stable. Overall market transactions were poor yesterday.

Ningbo: Yesterday morning, SHFE zinc futures prices rebounded from the previous day’s level. Downstream enterprises feared high prices sharply, and overall inquiry and purchase willingness was low, with poor spot transactions. Traders took a casual approach to selling, and spot premiums were little changed.

Social Inventory: On August 4, LME zinc inventory decreased by 200 mt to 98,450 mt, down 0.2%. According to SMM, as of August 3, domestic inventory edged up slightly.

Zinc Price Outlook: Overnight, LME zinc posted a bullish candlestick, with the 5-day moving average below providing support. The US ADP employment data recorded a new low for the year, and the US dollar index declined. Additionally, LME zinc ingot inventory continued to decrease, the LME Cash-3M backwardation structure remained high, and bears cut positions, driving LME zinc to surge again. The overall center shifted notably higher. Overnight, SHFE zinc recorded a bullish candlestick, with the upper band of Bollinger Bands providing support. Recently, frequent disruptions in China's ore supply occurred, and expectations of tight domestic zinc concentrates persisted. Bulls continued to add positions, and SHFE zinc continued to move higher during the night session, and it is expected to stay high in the short term.

Data Source Statement: All data other than publicly available information are processed by SMM based on public information, market communication, and SMM's internal database models, and are for reference only, not constituting any investment advice.