Affected by Tariff Uncertainty, LME Zinc Under Pressure and Fluctuating in Operation [SMM Morning Meeting Summary]

Futures Market: Overnight, LME zinc opened at $2,916/mt, fluctuated rangebound near the daily moving average, and reached a high of $2,921.5/mt. It then fluctuated downward to a low of $2,882.5/mt, partially recovering losses before fluctuating rangebound around $2,900/mt and pulling back under resistance. It eventually closed down at $2,893/mt, a decrease of $18/mt or 0.62%. Trading volume fell to 65,398 lots, and open interest decreased by 1,999 lots to 220,000 lots. Overnight, LME zinc recorded a bearish candlestick, with the middle Bollinger Band forming resistance above. Meanwhile, the most-traded SHFE zinc 2503 contract opened at 24,075 yuan/mt. Bulls increased positions at the start, pushing SHFE zinc upward, followed by volatile movements near the daily moving average, reaching a high of 24,175 yuan/mt. Bulls attempted to push SHFE zinc above the daily moving average but faced resistance, pulling back to a low of 24,040 yuan/mt. It eventually closed down at 24,090 yuan/mt, a decrease of 25 yuan/mt or 0.1%. Trading volume fell to 45,467 lots, and open interest decreased by 369 lots to 97,623 lots. Overnight, SHFE zinc recorded a bullish candlestick, with the 20-day and 60-day moving averages forming resistance above.

Macro: Trump stated that if no agreement is reached between Russia and Ukraine, tariffs and sanctions will be imposed on Russia. Zelensky set conditions for a ceasefire, requiring at least 200,000 peacekeepers and US participation. The CEO of Norway's sovereign wealth fund suggested contrarian strategies: selling US tech stocks and buying Chinese stocks. Musk downplayed the "Stargate" project, stating it "actually has no funding." The Central Committee of the Communist Party of China and the State Council announced a new round of urbanization initiatives for agricultural migrants. Six departments, including the Central Financial Office, issued the "Implementation Plan for Promoting Medium and Long-Term Capital Entry into the Market." Trump announced plans to impose tariffs on Chinese goods, to which the Ministry of Foreign Affairs responded, expressing willingness to maintain communication and properly manage differences.

Spot Market:

Shanghai: Spot cargoes with invoices dated this month were priced near the average price. Domestic zinc ingots from long-term contracts continued to arrive, and traders actively sold ahead of year-end. This week, downstream enterprises entered the peak holiday period, significantly reducing inquiries for zinc ingots. Under sluggish sales, traders continued to lower spot premiums, and overall spot transactions remained poor.

Guangdong: Spot premiums were 10 yuan/mt against Shanghai. Overall, downstream consumption declined, and the number of active traders decreased significantly yesterday. Traders lowered premiums to facilitate sales, resulting in sluggish market transactions. Meanwhile, the price spread between futures contracts remained stable. Under weak trading, spot premiums declined and are expected to continue falling amid weak market consumption.

Tianjin: Tianjin spot cargoes were at a discount of 20 yuan/mt against Shanghai. The futures market fluctuated yesterday, and downstream restocking was limited to small-scale just-in-time purchases. Overall demand was weak, with fewer market quotes as many traders and smelters closed accounts for year-end. Overall transactions were poor.

Ningbo: Spot premiums were 20 yuan/mt against Shanghai. Spot quotes in Ningbo remained scarce yesterday as many downstream enterprises were on holiday. Under sluggish sales, traders continued to lower spot premiums, and market transactions were poor. Spot premiums are expected to decline further.

Social Inventory: On January 22, LME zinc inventory decreased by 2,175 mt to 192,950 mt, a drop of 1.11%. As of Monday (January 20), SMM's total zinc ingot inventory across seven regions stood at 59,400 mt, down by 1,600 mt from January 13 but up by 600 mt from January 16, indicating an increase in domestic inventory.

Zinc Price Forecast: The US dollar index hovered at high levels and closed higher, driven by Trump's tariff policies, leading to a downward shift in LME zinc's center. Amid uncertainties surrounding tariffs, LME zinc is expected to remain under pressure and fluctuate in the short term. Domestically, end-use consumption has significantly weakened, market activity is sluggish, and spot premiums are declining. Zinc prices are expected to fluctuate downward in the short term.