Macro Pressure Weighs on LME Zinc, Tight Ore Supply Supports SHFE Zinc [SMM Morning Meeting Minutes]

SMM Zinc Morning Meeting Notes, September 3
Futures: Overnight, LME zinc opened at $3,906/mt, edged up to $3,920.5/mt in early trading, then drifted lower to hit a low of $3,840.5/mt before rebounding from the low to close at $3,877.5/mt, down $27/mt, or 0.69%. Trading volume fell to 18,828 lots, while open interest rose by 4,373 lots to 260,000 lots. Overnight, the most-traded SHFE zinc 2610 contract opened at 26,470 yuan/mt, quickly dipped to a low of 26,380 yuan/mt after the open, then consolidated higher to touch a high of 26,615 yuan/mt before closing at 26,520 yuan/mt, down 65 yuan/mt, or 0.24%. Trading volume fell to 61,060 lots, while open interest decreased by 1,504 lots to 161,000 lots.

Macro: US August ADP employment data came in below expectations. The US Fed's "No. 3 official" said inflation trends are slowly declining and current interest rates are appropriate. Trump said he is ready to strike Iran again at any time, and the new round of strikes on Iran will not "last too long." US media reported that due to concerns about a heavy defeat in the midterm elections, Trump's core aides are pushing to temporarily "keep a low profile" on the Iran conflict.

Shanghai: Yesterday, refined zinc purchase sentiment in Shanghai was 1.96, while sales sentiment was 2.54. In the morning, SHFE zinc futures prices fell significantly MoM to around 26,500 yuan/mt. Some downstream enterprises purchased on demand, but most others continued to expect lower zinc prices. Overall spot trades improved only modestly yesterday, and spot premiums lacked upward momentum.

Guangdong: Yesterday, refined zinc purchase sentiment in Guangdong was 1.70, while sales sentiment was 2.34. Although zinc prices pulled back from highs yesterday, they still consolidated at highs above 26,000 yuan/mt. High prices dampened downstream purchasing enthusiasm, and market transactions remained thin.

Tianjin: Yesterday, refined zinc purchase sentiment in Tianjin was 1.68, while sales sentiment was 2.37. Futures pulled back slightly, but zinc prices remained high and had not yet reached downstream psychological price levels. Downstream buyers were cautious about high prices and did not inquire or pick up goods. Trader shipments increased, and shipment premiums held steady. Overall market transactions were poor yesterday.

Ningbo: Yesterday morning, zinc futures prices fell significantly, but downstream enterprises mostly continued to expect lower prices. In addition, orders at Ningbo alloy plants showed no obvious improvement, so downstream enterprises continued to purchase on demand. Spot premiums held steady MoM.

Inventory: On September 2, LME zinc inventory increased by 1,400 mt to 100,525 mt, up 1.41%. According to SMM communication, as of Monday this week (August 31), total zinc ingot inventory across seven SMM regions stood at 251,000 mt, down 17,300 mt from August 24 and down 18,900 mt from August 27. China's inventory decreased.

Zinc price forecast: Overnight, LME zinc formed a bearish candlestick. Escalating Middle East conflicts pushed up oil prices and the US dollar, raising market concerns about inflation and interest rate hikes, which put nonferrous metals under pressure. Additionally, increased bearish positioning pushed LME zinc's center lower, but low LME inventory and tight nearby supply still provided some support for LME zinc. Overnight, SHFE zinc formed a small bullish candlestick. LME zinc retreated from highs, dragging SHFE zinc lower, but tight domestic ore supply and low TCs continued to underpin zinc prices. SHFE zinc recovered somewhat after dipping.

Data source statement: Except for public information, all other data are processed by SMM based on public information, market communication, and SMM's internal database models, and are for reference only and do not constitute decision-making advice.