Non-Farm Payrolls Data Exceed Expectations, LME Zinc Jumps Initially and Then Pulls Back [SMM Zinc Morning Meeting Summary]

Zinc Morning Meeting Summary on January 13

Futures Market: Last Friday, LME zinc opened at $2,854.5/mt. In early trading, LME zinc consolidated around the daily moving average, then bulls increased positions, pushing the center of LME zinc upward, peaking at $2,906/mt during the night session. By the end of trading, profit-taking by bulls caused the center to pull back to $2,870/mt, closing up at $2,862.5/mt, an increase of $2.5/mt or 0.09%. Trading volume decreased to 11,363 lots, while open interest increased by 1,351 lots to 218,000 lots. Last Friday, LME zinc recorded a long upper shadow candlestick, with resistance from various moving averages above. Last Friday, the most-traded SHFE zinc 2502 contract opened at 24,300 yuan/mt. In early trading, shorts pressured the contract downward to a low of 24,145 yuan/mt. Subsequently, shorts exited the market, leading to a V-shaped rebound, with the contract peaking at 24,355 yuan/mt. Later, the center fluctuated downward to around 24,210 yuan/mt, closing up at 24,215 yuan/mt, an increase of 70 yuan/mt or 0.29%. Trading volume decreased to 69,302 lots, while open interest decreased by 388 lots to 97,533 lots. Last Friday, SHFE zinc recorded a bearish candlestick, but the MACD bearish bars narrowed.

Macro: US non-farm payrolls data for December showed unexpected acceleration in job growth and a decline in the unemployment rate, prompting some brokers to predict that the US Fed will raise interest rates. China is set to release December 2024 trade data, with exports expected to grow 7.3% YoY and imports to narrow their decline to 1.5%. The Biden administration announced its toughest sanctions yet on Russian oil.

Spot Market:
Shanghai: Spot premiums were quoted at 240–250 yuan/mt over the average price. As year-end approaches, traders in the Shanghai market actively sold goods. However, some downstream producers in east China have already halted production for the holidays, leading to weakening demand for zinc ingots. The price spread between futures contracts also narrowed, and spot premiums continued to decline. Market transactions were mainly conducted among traders.

Guangdong: Spot premiums over Shanghai were 70 yuan/mt. Overall, downstream stocking demand has gradually weakened, and with the futures market trending upward, market transactions were generally moderate.

Tianjin: Tianjin's discount to Shanghai was 100 yuan/mt. The futures market saw a slight rebound, but downstream enterprises have started to shut down for the holidays, leading to a significant pullback in downstream consumption. Demand remained weak, and traders' quotes were scattered. Some traders, eager to sell before the holidays, lowered their quotes. Transactions were mainly between traders, with overall market activity being moderate.

Ningbo: Spot premiums over Shanghai were quoted at 170 yuan/mt. The futures market continued to fluctuate downward, and downstream holiday schedules gradually began. Coupled with the continuous arrival of pre-sold zinc ingots, some enterprises have already completed stocking. Downstream purchasing sentiment remained low, and traders lowered their spot premium quotes. Spot premiums are expected to weaken further.

Social Inventory: On January 10, LME zinc inventory decreased by 2,825 mt to 214,075 mt, a decline of 1.3%. As of January 9, total zinc ingot inventory across SMM's seven regions stood at 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: Strong non-farm payrolls data reinforced expectations that the US Fed will not significantly cut interest rates this year. A stronger US dollar limited the upside room for LME zinc. SHFE zinc, after falling below the previous low of 24,000 yuan/mt, showed insufficient downward momentum due to renewed destocking in social inventory, maintaining a primarily low-level fluctuation.