Inflation Data Below Expectations, Zinc Prices Rebound Upward [SMM Morning Meeting Notes]

Zinc Morning Meeting Summary on January 16

Futures Market: Overnight, LME zinc opened at $2,863/mt. After a brief consolidation around the daily moving average, shorts increased positions, pushing the center downward to around $2,820/mt, with a low of $2,807.5/mt during the session. During European trading hours, LME zinc rebounded upward, reaching a high of $2,875/mt in the night session, and finally closed down at $2,867/mt, a decrease of $1.5/mt or 0.05%. Trading volume increased to 13,621 lots, and open interest rose by 325 lots to 217,000 lots. Overnight, the most-traded SHFE zinc 2503 contract opened at 23,565 yuan/mt. After a brief consolidation, longs increased positions, driving prices to fluctuate upward, reaching a high of 23,810 yuan/mt near the session's end. It eventually closed down at 23,790 yuan/mt, a decrease of 10 yuan/mt or 0.04%. Trading volume decreased to 72,873 lots, while open interest increased by 3,326 lots to 105,000 lots. Overnight, SHFE zinc recorded a bullish candlestick, with the MACD bearish bar narrowing.

Macro: In December, US overall CPI mildly rebounded, while core CPI unexpectedly declined. The US Fed's "third-in-command" stated that inflation has shown a broad-based decline. The ceasefire agreement in Gaza is set to take effect on January 19. The IEA lowered its forecast for global oil demand growth in 2025, while OPEC maintained its previous outlook. The US imposed a new round of sanctions on Russia. The State Council announced that local governments are prohibited from offering rewards to issuers or intermediaries based on the results of public stock offerings. The Ministry of Commerce and other departments stated that starting January 20, subsidies of up to 500 yuan for mobile phones and up to 2,000 yuan for 12 categories of home appliances will be provided.

Spot Market:

Shanghai: According to SMM, many traders plan to start their holidays next week and are currently offloading inventory. Spot premiums in the market continued to decline. Although some downstream enterprises engaged in buying the dip and restocking yesterday, overall inquiries and purchases were limited, with transactions showing little improvement compared to the previous day.

Guangdong: Spot premiums were 60 yuan/mt against Shanghai. Overall, the futures market declined yesterday, prompting some enterprises that have not yet started their holidays to restock at lower prices. Meanwhile, traders, concerned about further declines in premiums, reduced premiums to offload inventory. Although the price spread between futures contracts widened yesterday, buying sentiment in the market remained low, and spot premiums fell.

Tianjin: Tianjin's discount against Shanghai was 40 yuan/mt. During the first trading session, zinc prices pulled back slightly, reaching downstream psychological price levels, but downstream purchasing enthusiasm was low. Traders, eager to offload inventory, slightly reduced premiums. In the second trading session, zinc prices dropped significantly, leading to increased downstream buying on dips. Coupled with a reduction in the availability of zinc ingot spot cargoes in Tianjin, traders held their quotes steady. Overall market transactions improved compared to the previous day.

Ningbo: Spot premiums were 90 yuan/mt against Shanghai. Yesterday, the futures market saw a significant decline. As year-end approaches, traders are offloading inventory, leading to continued declines in spot premiums. Some downstream enterprises engaged in just-in-time restocking at lower prices, but overall market activity remained sluggish. Social Inventory: On January 15, LME zinc inventory decreased by 3,100 mt to 206,375 mt, a drop of 1.48%. As of January 13, total zinc ingot inventory across SMM's seven regions stood at 61,000 mt, down by 700 mt from January 6 but up by 3,000 mt from January 9, indicating an increase in domestic inventory.

Zinc Price Forecast: Overnight, LME zinc recorded a bullish candlestick with a long lower shadow, facing resistance at the 10-day moving average. Lower-than-expected consumption data overnight eased market concerns about accelerating inflation, leading to a pullback in the US dollar index and an upward movement in LME zinc. Supported by the overseas market, SHFE zinc rebounded from low levels overnight. Fundamentals side, the resumption of production at a northern mine has increased supply. On the spot market, as downstream enterprises enter the holiday period, spot premiums have rapidly declined. Zinc prices are expected to have limited upward rebound potential.