US Dollar Index Remains High, LME Zinc Fluctuates at Low Levels [SMM Zinc Morning Meeting Summary]

Zinc Morning Meeting Summary on January 10

Futures Market: Overnight, LME zinc opened at $2,826/mt, fluctuating around the daily moving average after opening. It dipped to $2,818.5/mt before quickly rising to a high of $2,876/mt. Subsequently, LME zinc fell back from highs to near the daily moving average, then slightly rebounded at the session's end, closing up at $2,860/mt, an increase of $37.5/mt or 1.33%. Trading volume decreased to 12,648 lots, while open interest rose by 366 lots to 217,000 lots. Overnight, the most-traded SHFE zinc 2502 contract opened at 24,185 yuan/mt, initially reaching a high of 24,235 yuan/mt before trending downward to a low of 24,040 yuan/mt. It then fluctuated around 24,100 yuan/mt and finally closed down at 24,100 yuan/mt, a decrease of 10 yuan/mt or 0.04%. Trading volume fell to 53,502 lots, while open interest increased by 74 lots to 101,000 lots.

Macro: US Fed's Harker stated that the Fed is on the path to interest rate cuts but should pause to observe the situation. The UK central bank's deputy governor expressed support for interest rate cuts but noted uncertainty about the pace. Trudeau warned that Canada would respond if Trump imposes tariffs on the country. Joseph Aoun, commander of the Lebanese army, won the presidential election. Russia-Ukraine negotiations may take place in H1 2025. The National Bureau of Statistics (NBS) reported that December's CPI rose 0.1% YoY.

Spot Market:

Shanghai: In the early session, the market quoted spot premiums of 280-300 yuan/mt over the average price. Some zinc ingots from long-term contracts arrived in Shanghai, increasing supply from traders. However, some enterprises maintained a bearish outlook, leading to low purchase willingness for spot cargoes. Amid sluggish market transactions, some traders lowered premium quotes. Downstream just-in-time procurement on dips resulted in overall average market transactions. Guangdong: Spot premiums were 50 yuan/mt over Shanghai. Although zinc prices trended lower, downstream stocking demand weakened, and buying sentiment declined, leading to a subdued trading atmosphere and lower spot quotes. However, the widening price spread between futures contracts caused a slight rise in premiums. Tianjin: Tianjin's discount to Shanghai was 60 yuan/mt, with a basis of 510 yuan/mt. Futures prices continued to pull back, and many downstream enterprises were on holiday. Additionally, some enterprises focused on fulfilling long-term contracts with fewer pricing transactions. The current price level has not reached downstream psychological price levels, and bearish sentiment persisted. Transactions were mainly between traders, with overall market activity remaining average. Ningbo: Spot premiums were 200 yuan/mt over Shanghai. Some zinc ingots from long-term contracts arrived, and spot premiums remained high. However, many Ningbo zinc alloy plants plan to halt operations in mid-to-late January. Terminal orders have gradually weakened, and some low-priced pre-sold zinc ingots in Ningbo attracted higher purchase willingness. Nonetheless, spot transactions showed no improvement.

Social Inventory: On January 10, LME zinc inventory decreased by 3,625 mt to 216,900 mt, a decline of 1.64%. As of January 9, SMM's total zinc ingot inventory across seven regions was 58,000 mt, down by 6,500 mt from January 2 and by 3,700 mt from January 6, indicating a reduction in domestic inventory.

Zinc Price Forecast: Overnight, LME zinc formed a bullish candlestick, with resistance from the 5-day moving average. LME zinc inventory decreased by 3,625 mt to 216,900 mt, a decline of 1.64%. Concerns over US tariff policies persisted, and the US dollar index fluctuated at highs, exerting pressure on zinc prices. LME zinc is expected to fluctuate at lows. Overnight, SHFE zinc formed a bearish candlestick, with support from the lower Bollinger Band. Recently, downstream sectors have continued raw material stocking on dips, and SMM zinc ingot inventory continued to decline MoM, providing some support for zinc prices. SHFE zinc's center is expected to move slightly upward.