LME Inventory Continues to Decline, LME Zinc Fluctuates at Highs [SMM Morning Meeting Minutes]

Zinc Morning Meeting Minutes, April 27

Futures: Last Friday, LME zinc opened at $3,451.5/mt. At the beginning of the session, LME zinc fluctuated around the daily moving average. During European trading hours, bears increased open interest and pushed LME zinc down sharply to a low of $3,423/mt. Subsequently, bulls increased open interest and drove the center of LME zinc higher, touching a high of $3,487/mt during the night session. Toward the end of the session, the center edged slightly lower to near the daily moving average, ultimately closing higher at $3,462.5/mt, up $8.5/mt, a gain of 0.25%. Trading volume increased to 10,143 lots, and open interest increased by 1,198 lots to 232,000 lots. Last Friday, the most-traded SHFE zinc 2606 contract opened higher with a gap at 24,400 yuan/mt. At the beginning of the session, SHFE zinc quickly touched a high of 24,505 yuan/mt, after which bulls reduced open interest and exited, sending SHFE zinc lower throughout the session to a low of 24,320 yuan/mt by the end. It ultimately closed higher at 24,330 yuan/mt, up 60 yuan/mt, a gain of 0.25%. Trading volume decreased to 59,948 lots, and open interest increased by 2,600 lots to 107,000 lots.

Macro: A shooting occurred at the White House Correspondents' Dinner in the US; Trump said Iran could call if it wanted to talk; Washington D.C. prosecutor Piro announced the suspension of the investigation into Powell; Iran's foreign minister briefly revisited and then left Pakistan, delivering ceasefire conditions to the Pakistani side; Iran's deputy speaker of parliament said Mojtaba ordered that the Strait of Hormuz must not be restored to its pre-war status; Russian President Putin may head to Miami in the US to attend the G20 summit; Azerbaijan sold off $3 billion worth of gold for the first time; the General Office of the CPC Central Committee and the General Office of the State Council issued opinions on strengthening services and management for new employment groups, mentioning the strengthening of internet platform algorithm governance; the Ministry of Finance reported that securities transaction stamp tax in Q1 grew by 78.1%; the CSRC announced that qualified foreign investors are allowed to participate in treasury bond futures trading.

Spot market:

Shanghai: The purchase sentiment for refined zinc in the Shanghai region was 1.92, and the shipments sentiment was 2.75. Toward the end of the week, futures zinc prices stayed high. Last Friday, downstream enterprises' purchase willingness remained low, with spot purchases basically made on an as-needed basis. Overall spot trades were sluggish, and traders adopted a laid-back approach to shipments and pricing. Overall spot premiums remained firm.

Guangdong: The purchase sentiment for refined zinc in the Guangdong region was 1.71, and the selling price sentiment was 2.6. Last Friday, the center of zinc prices pulled back slightly but overall continued to fluctuate at highs. Downstream purchases were mostly driven by rigid demand. Meanwhile, market bills have been relatively tight recently, leaving limited room for trades among traders. The spot market performed relatively average.

Tianjin: The purchase sentiment for refined zinc in the Tianjin region was 1.69, and the shipments sentiment was 2.41. Last Friday, zinc prices continued to fluctuate at highs. Downstream restocking was limited, mainly driven by rigid demand. Traders continued to offer shipments at large discounts, and overall market transactions were poor.

Ningbo: Few traders were making shipments in the market. Last Friday, spot premiums for zinc ingots were basically stable. With zinc futures fluctuating at highs, downstream enterprises made few inquiries and purchases, and overall spot transactions were largely on an as-needed basis.

Social inventory: On April 24, LME zinc inventory decreased by 1,475 mt to 102,825 mt, a decline of 1.41%. According to SMM communications, as of April 23, China's inventory decreased slightly by 100 mt to 259,900 mt.

Zinc price forecast: Last Friday, LME zinc posted a small bullish candlestick, with the 5-day moving average providing support below. Last Friday, LME zinc fluctuated at highs. LME inventory continued to decline, and LME Cash-3M structural risks persisted, providing strong support for LME zinc. Last Friday, SHFE zinc posted a long upper shadow bearish candlestick, with the upper Bollinger Bands rail forming resistance above and various moving averages providing support below. Last Friday, the upward shift in the SHFE zinc center was mainly driven by continued significant changes in macro sentiment. The market focused on fundamentals. As the SHFE/LME zinc price ratio corrected downward, the market had expectations of zinc ingot exports. Combined with increased smelter maintenance in May, zinc prices held up well.

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