Overnight, LME zinc rebounded from lows and closed higher, with the opening price at $347 per ton, a high of $3,488, a low of $3,405, and a closing price of $3,482, up $41 or 1.19%. Trading volume increased by 532 lots to 11,012 lots, while open interest rose by 1,090 lots to 241,039 lots. On the SHFE, zinc prices consolidated within a narrow range before rising, with the main June 2026 contract closing at ¥24,445 per ton, up ¥320 or 1.33%.
Macro factors include heightened geopolitical tensions. U.S. President Trump deemed Tehran's response to the U.S. peace proposal "completely unacceptable," reducing the likelihood of a lasting ceasefire and a swift reopening of the Strait of Hormuz. As a strategic channel handling nearly 20% of global oil supply, the risk of its closure has dashed market optimism for rapid negotiations. Iran set clear negotiation demands, including war reparations, sanctions relief, and recognition of its authority over the strait, while accusing the U.S. of attacking oil tankers. Israeli Prime Minister Netanyahu stated the conflict would continue until Iran's uranium enrichment is eliminated. The sharp divergence among the U.S., Iran, and Israel dims short-term reconciliation prospects, leaving the strait's reopening timeline uncertain.
Domestically, China's CPI rose 0.3% month-on-month and 1.2% year-on-year in April, influenced by international crude oil price fluctuations and increased holiday travel demand. Driven by rising international commodity prices and stronger demand in some domestic sectors, PPI increased 1.7% month-on-month and 2.8% year-on-year, with both growth rates expanding compared to the previous month.
Fundamentally, the tight supply of zinc ore persists, exacerbated by mining accidents and extreme weather, leading to a global contraction in zinc ore supply. Zinc concentrate processing fees have fallen to low levels both domestically and internationally. Supply disruptions intensified following an explosion at Glencore's Kazzinc smelter in Kazakhstan, with an annual capacity of 250,000-300,000 tons. The extent of production cuts and repair timelines remain unclear. Additionally, increased maintenance at domestic smelters in May, coupled with China's potential suspension of sulfuric acid exports starting May, could lead to inventory buildup at smelters, potentially forcing lower operating rates and tightening zinc ingot supply. Demand remains subdued, with domestic end-user demand falling short of expectations during the peak season and gradually entering a lull. Overall consumption is expected to weaken, with limited growth in die-casting orders. However, overseas demand remains relatively stable, and domestic galvanizing operations continue to recover steadily.
In summary, despite lingering geopolitical tensions, bullish sentiment dominates the market. Fundamental factors such as ore supply tightness, low processing fees, and supply contraction expectations provide a floor for zinc prices. However, high domestic inventories and cautious downstream sentiment cap the upside, limiting breakout momentum. Zinc prices are likely to continue trading within a high-range consolidation in the near term. Spot zinc prices are expected to rise today, with a projected trading range of ¥24,100 to ¥24,800 per ton.
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