LME zinc retreated on September 22 as bearish positioning intensified throughout the trading session, according to Shanghai Metals Market morning meeting summary. The contract opened at $3,944.0 per metric ton and declined steadily, reaching a low of $3,906.5/mt during European trading hours before recovering slightly. The session closed at $3,925.5/mt, representing a loss of $15.0/mt or 0.38%.
Trading volume declined to 12,208 lots while open interest increased by 1,337 lots to 263,000 lots. Simultaneously, the Shanghai Futures Exchange zinc 2611 contract experienced similar downward pressure. The contract opened at 26,715 yuan/mt and initially gained ground as long positions accumulated, reaching 26,790 yuan/mt.
However, increased short positioning reversed the gains, and the contract ultimately settled at 26,675 yuan/mt, down 35 yuan/mt or 0.13%. Open interest expanded by 708 lots to 136,000 lots while trading volume decreased to 47,882 lots. Market analysts attributed the decline to intensified bearish positioning and a strengthening US dollar index, despite signals from the US Federal Reserve regarding potential additional rate hikes.
The LME Cash-3M backwardation structure remained intact, however, maintaining elevated price levels at the market center. Spot market conditions across major Chinese zinc hubs reflected weakening demand at elevated prices. In Shanghai, purchasing sentiment measured 2.02 against selling sentiment of 2.58, with downstream enterprises showing reluctance to commit at current levels.
Similar patterns emerged in Guangdong, Tianjin, and Ningbo, where high prices prompted cautious buying behavior and reduced transaction activity. Traders maintained firm quotes and spot premiums remained largely stable across regions. Inventory metrics showed mixed signals for the market.
LME zinc inventories increased by 1,550 mt to 116,850 mt as of September 18, while domestic Chinese inventories rose by 2,100 mt to 215,600 mt by September 21. The inventory accumulation, combined with weak spot demand at current price levels, created additional headwinds for zinc prices. Market technicians noted that LME zinc found support from moving averages at lower levels, with the MACD indicator showing a narrowing bearish candlestick pattern.
SHFE zinc similarly encountered support from its middle Bollinger Band. Despite these technical supports, the combination of increased short positioning, inventory growth, and weak downstream demand created resistance to significant price rebounds.
Source: news.metal.com