Demand Weakens, SHFE Zinc Center Shifts Downward [SMM Zinc Morning Comment Dec 3]

Overnight, many US Fed officials remained open to an interest rate cut in December; Israel and Lebanon once again accused each other of violating the ceasefire agreement; Trump stated that Hamas would pay a heavy price if Gaza hostages were not released before the inauguration; OPEC might extend the latest production cuts until the end of Q1 2025; the unemployment rate in the Eurozone remained at a historic low; MicroStrategy increased its Bitcoin holdings for the fourth consecutive week, with total holdings reaching $38 billion; President Xi Jinping emphasized the comprehensive promotion of high-quality development of the "Belt and Road" initiative; PBOC Governor Pan Gongsheng stated that the central bank would continue to adhere to supportive monetary policy stance and orientation next year; the PBOC announced that starting from January 2025, a new revised narrow money (M1) statistical caliber would be used, and two new financial instruments would be added.

Overnight, LME zinc opened at $3,099/mt, quickly peaked at $3,110/mt at the opening, then the bulls reduced positions, causing the LME zinc center to shift downward, hitting a low of $3,062/mt during the night session, and finally closed down at $3,081.5/mt, down $27/mt, a decline of 0.81%. Trading volume decreased to 9,323 lots, and open interest decreased by 1,605 lots to 248,000 lots. Overnight, LME zinc recorded a small bearish candlestick, with LME inventory decreasing by 575 mt to 276,275 mt, a decline of 0.21%. On the macro front, the US manufacturing ISM data recorded 48.4, the best data since June, and the US dollar strengthened, putting pressure on LME zinc, which is expected to fluctuate mainly today.

Overnight, the most-traded SHFE zinc 2501 contract opened at 25,530 yuan/mt, quickly hit a low of 25,405 yuan/mt at the beginning of the session, then recorded a "V" shaped rebound peaking at 25,565 yuan/mt, followed by an increase in short positions, causing SHFE zinc to fluctuate downward, and finally closed down at 25,415 yuan/mt, down 40 yuan/mt, a decline of 0.16%. Trading volume decreased to 69,578 lots, and open interest increased by 2 lots to 142,000 lots. Overnight, SHFE zinc recorded a bearish candlestick. In terms of fundamentals, despite imbalance in the raw material end, and social inventory continues destocking, the demand side has weakened as the weather turns colder, causing the SHFE zinc center to shift downward, and it is expected to fluctuate downward mainly today.