Zinc Prices Have Strong Support at the Bottom; Focus on LME Ship-to-Delivery Warehouse Volumes [SMM Morning Meeting Minutes]

Zinc Morning Meeting Notes, August 18

Futures: Overnight, LME zinc opened at $3,765/mt. In early trading, LME zinc drifted higher, touching $3,790/mt. Entering the European session, the center edged slightly lower. During the night session, bears increased open interest to pressure prices, and LME zinc quickly dipped to an intraday low of $3,737/mt. Near the close, bears reduced open interest, pushing LME zinc to rebound slightly, and it finally closed down at $3,758/mt, down $4/mt, a decline of 0.11%. Trading volume increased to 10,239 lots, and open interest increased by 3,703 lots to 258,000 lots. Overnight, the SHFE zinc 2610 contract opened at 25,835 yuan/mt. In early trading, bears increased open interest to pressure prices, and SHFE zinc drifted lower, dipping to 25,605 yuan/mt. Subsequently, bears reduced open interest, pushing prices to rebound gradually. The decline narrowed into the close, and it finally closed down at 25,770 yuan/mt, down 95 yuan/mt, a decline of 0.37%. Trading volume decreased to 69,911 lots, and open interest increased by 3,755 lots to 148,000 lots.

Macro: Trump: The US is not seeking to extend the memorandum of understanding with Iran. Trump threatened Oman: if it obstructs the US, it will be bombed. A senior Iranian official: a final deadline of several weeks has been set for the US to fully implement the memorandum of understanding. Iranian media said a UAE oil tanker was detained in the Strait of Hormuz. The yield on 30-year US Treasuries hit a 19-year high, and China, the UK, and Japan all reduced their holdings of US Treasuries in June.

Spot Market:

Shanghai: In Shanghai, refined zinc purchase sentiment was 1.82, and shipments sentiment was 2.59. Yesterday, SHFE zinc futures prices rose markedly. Downstream enterprises’ fear of high prices intensified, and purchase willingness on inquiries was poor yesterday. Traders’ shipments were not smooth, spot premiums were in the doldrums, and overall trading was mostly among traders.

Guangdong: In Guangdong, refined zinc purchase sentiment was 1.78, and selling sentiment was 2.48. The futures center moved higher, downstream purchasing enthusiasm faded, and the market was mostly on the sidelines. Spot trading in Guangdong was sluggish yesterday.

Tianjin: In Tianjin, refined zinc purchase sentiment was 1.74, and shipments sentiment was 2.51. Zinc prices continued to rise to levels that were relatively unacceptable to downstream buyers. Coupled with limited improvement in actual consumption, downstream players were mainly on the sidelines. Traders’ shipments spot premiums held steady, and overall market trading was average yesterday.

Ningbo: Over the weekend, long-term contract cargoes arrived in the Ningbo market one after another. Yesterday, there were relatively more traders making shipments overall, but futures prices rose markedly in the morning, and downstream alloy plants showed poor purchase willingness. Overall spot trading was not smooth, and spot premiums consolidated on a subdued note.

Social Inventory: On August 17, LME zinc inventory decreased by 1,175 mt to 86,825 mt, a decline of 1.34%. According to SMM communications, as of August 17, China inventory increased by 5,700 mt to 270,000 mt.

Zinc Price Outlook: Overnight, LME zinc posted a small bearish candlestick, with the center of the daily candlestick moving higher. The upper Bollinger Bands formed resistance, and the KDJ opening expanded downward. Overnight, the US dollar was weak, providing bottom support for base metals. The LME zinc backwardation structure was $82.88/mt, inventory continued destocking, and prices fluctuate at highs; attention should be paid to the scale of LME ship-to-delivery-warehouse volumes. Overnight, SHFE zinc posted a small bearish candlestick with no upper shadow, with the center of the daily candlestick moving lower, while various moving averages below provided support. Zinc prices fluctuate at highs, downstream enterprises were cautious in procurement due to elevated prices, and social inventory increased again to 270,000 mt, capping upside room for zinc prices.

Data Source Statement: Except for other data from public information, all data are processed by SMM based on public information and market communication, relying on SMM’s internal database model, for reference only and not constituting decision-making advice.