US September PPI Exceeds Expectations, LME Zinc Center Continues to Shift Downward [SMM Zinc Morning Meeting Summary]

SMM Zinc Morning Meeting Minutes, October 16

Futures: Overnight, LME zinc opened at $3,709.5/mt, then moved lower throughout the session. It hit a high of $3,716/mt in early trading, and near the end of the session it dipped to $3,650/mt, eventually closing down at $3,673.5/mt, down $42/mt, or 1.13%. Trading volume increased to 15,979 lots, and open interest rose by 4,173 lots to 264,000 lots. Overnight, the most-traded SHFE zinc 2612 contract opened at 25,300 yuan/mt, then rebounded throughout the session. It dipped to 25,170 yuan/mt in early trading, hit a high of 25,445 yuan/mt during the session, and eventually closed down at 25,375 yuan/mt, down 50 yuan/mt, or 0.2%. Trading volume decreased to 40,066 lots, and open interest rose by 250 lots to 103,000 lots.

Macro: US September PPI and retail sales data both came in above expectations. US Fed's Hammack: worsening inflation expectations may force the US Fed to take more forceful action. Yemeni officials said Houthi forces attacked the presidential palace in Aden, killing five people. US media: the US has formulated a new strike plan against Iran and may use the "Mother of All Bombs" for the first time. Both Russia and Ukraine struck each other's energy facilities. The International Energy Agency agreed to fully release the 100 million barrels of crude oil that have not yet been released, including putting 20 million barrels of diesel on the market as soon as possible. South Korea's Financial Services Commission: the stock market decline reflects an overreaction.

Spot market:

Shanghai: Yesterday, refined zinc purchasing sentiment in Shanghai was 2.16, and selling sentiment was 2.61. Futures zinc prices continued to slide. Yesterday, traders in east China showed strong willingness to hold prices firm, and some traders continued to raise spot quotes, driving spot premiums higher accordingly. However, downstream enterprises mostly continued to expect lower futures zinc prices. Yesterday, overall inquiry and purchasing interest was poor, and spot trades showed mediocre performance.

Guangdong: Yesterday, refined zinc purchasing sentiment in Guangdong was 2, and selling sentiment was 2.58. The zinc price center pulled back slightly, but downstream users retained some expectations of further declines. In addition, enterprises had already made some priced purchases recently, so yesterday traders' shipments worsened, and spot transactions in Guangdong were relatively average.

Tianjin: Yesterday, refined zinc purchasing sentiment in Tianjin was 2.12, and selling sentiment was 2.38. Futures pulled back to downstream users' psychological price levels, so downstream users increased priced purchases and cargo pick-ups. Spot availability in Tianjin was relatively limited, with warrants accounting for the majority. Traders' selling premiums rose, and overall market transactions improved.

Ningbo: Yesterday, futures zinc prices continued to fall. Traders in the Ningbo market continued to raise spot premium quotes, but downstream enterprises mostly continued to expect lower prices and generally purchased only as needed, leaving spot trades relatively mediocre.

Social inventory: On October 15, LME zinc inventory increased by 6,925 mt to 151,050 mt, up 4.80%. According to SMM communication and understanding, as of October 15, domestic inventory edged down.

Zinc price forecast: Overnight, LME zinc recorded a bearish candlestick, with support provided by the lower Bollinger Band. The US September PPI data far exceeded expectations, and the persistently high US dollar index continued to weigh on base metals. Additionally, LME zinc ingot inventory kept accumulating to 151,000 mt, extending the decline in LME zinc. Overnight, SHFE zinc recorded a bullish candlestick, with support provided by the lower Bollinger Band. Affected by the continued decline in the LME, SHFE zinc opened lower with a gap in the night session. However, on the fundamentals side, the tight domestic ore supply situation in China has not improved, and smelters' production enthusiasm is relatively poor due to profit concerns, providing some support to zinc prices. SHFE zinc rebounded slightly from low levels and is expected to maintain a fluctuating trend in the short term.

Data source statement: Except for publicly available 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.