Weak Macro Sentiment, LME Zinc Posted Three Consecutive Declines [SMM Morning Meeting Minutes]

Zinc Morning Meeting Minutes, April 30

Futures: Overnight, LME zinc opened at $3,362/mt. At the beginning of the session, LME zinc consolidated along the daily moving average before fluctuating upward to a high of $3,381.5/mt. Bulls then took profits and exited, sending LME zinc downward, hitting a low of $3,608.5/mt in the night session. A slight correction occurred near the close, ending down at $3,329/mt, falling $30.5/mt or 0.91%. Trading volume decreased to 11,621 lots, and open interest decreased by 1,730 lots to 232,000 lots. Overnight, the most-traded SHFE zinc 2606 contract opened at 23,750 yuan/mt. At the beginning of the session, SHFE zinc moved downward, with the center shifting below the daily moving average. An attempt to break above failed, and it closed down at 23,595 yuan/mt, falling 265 yuan/mt or 1.11%. Trading volume decreased to 50,162 lots, and open interest decreased by 1,143 lots to 98,857 lots.

Macro: The US Fed kept interest rates unchanged as expected, and Powell will remain as governor; Waller's nomination for Fed Chairman passed a Senate committee vote; Trump: now is a good time to cut interest rates, Powell stays at the US Fed because no one else wants him; Trump: believes the Russia-Ukraine and Iran conflicts will end at roughly the same time; negotiations with Iran are being conducted by phone, very conveniently; Iran stated that if the US continues to seize ships, it will respond with "unprecedented military action"; Putin proposed a temporary ceasefire with Ukraine on "Victory Day" and put forward suggestions on Iran's nuclear plan; Trump suggested a temporary ceasefire in Ukraine; World Gold Council: global central banks increased gold holdings at the fastest pace in over a year in Q1; China discovered 13 new 100-million-mt-level oil fields and 26 new 100-billion-m³-level gas fields.

Spot market:

Shanghai: Futures zinc prices remained at low levels. Downstream buyers placed considerable pricing orders the day before, but overall pricing purchases decreased MoM yesterday. Overall spot trades weakened MoM, but few traders in Shanghai were making shipments, and overall spot premiums continued to rise.

Guangdong: The refined zinc purchasing sentiment in Guangdong was 1.98, and the selling sentiment was 2.58. Yesterday, zinc prices maintained a fluctuating trend. Downstream buyers had already placed pricing orders the day before, and some enterprises held bearish sentiment on the outlook. Spot market activity was relatively subdued. Premiums remained unchanged, but the large fluctuation in the price spread between futures contracts widened the Shanghai-Guangdong price spread.

Tianjin: The refined zinc purchasing sentiment in Tianjin was 1.93, and the shipment sentiment was 2.43. Yesterday, zinc prices were largely stable. Downstream buyers had basically completed pricing and stockpiling the day before. Purchasing sentiment was low yesterday, and traders made few shipments. Spot premiums were largely stable, and overall market transactions weakened compared to the previous day.

Ningbo: Few traders in Ningbo were offering quotes, and there was some divergence in overall quotes. However, downstream enterprises had basically completed earlier pricing and stockpiling. Inquiries decreased yesterday, and overall spot transactions weakened MoM.

Social inventory: On April 29, LME zinc inventory increased by 2,900 mt to 101,125 mt, up 2.95%. According to SMM communication, as of April 27, China's inventory edged up by 300 mt to 260,200 mt.

Zinc price outlook: Overnight LME zinc posted three consecutive bearish candlesticks, with the daily candlestick center shifting downward and the 40-day moving average providing support below. Overnight the US Fed kept interest rates unchanged, the US dollar index strengthened, and market concerns over economic growth intensified. Base metals were in the doldrums. The LME zinc 0-3 contract shifted to a contango structure, inventory also increased, and the zinc price center moved lower. Overnight SHFE zinc posted a bearish candlestick, with various moving averages above forming resistance. Under weak macro sentiment, base metals were overall under pressure. The spot market also saw a notable decline in trading activity due to tax invoice issues. However, low TCs provided strong bottom support for zinc prices. Attention should be paid to changes in macro sentiment and actual smelter production in May.

Data source disclaimer: Data other than publicly available information is derived from public information, market communication, and SMM's internal database models, processed by SMM. It is for reference only and does not constitute decision-making advice.