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Processing Fee Drop Triggers Raw Material Shortage

Fed Officials’ Hawkish Comments Dampen CPI Optimism, LME Zinc Closed Down 0.38% Overnight; A Significant Drop in Processing Fees Deepens Raw Material Shortage Expectations, Surpassing Expectations in Domestic Real Estate Policies Boosts Zinc Prices, Expected Rise in Spot Zinc Prices Today.

LME zinc surged and then fell last week, opening at $3128.5/ton, reaching a high of $3185, a low of $3083, and closing at $3123, down $12, or 0.38%. Trading volume decreased by 1447 lots to 12205 lots, and open interest increased by 1350 lots to 242423 lots. Overnight, the main SHFE zinc contract 2407 opened high and then fell, closing at 24,775 yuan/ton, up 80 yuan, or 0.32%.

Today’s spot zinc price forecast: Fed Governor Waller mentioned that although recent data suggest progress in controlling inflation, he needs to see “several months” of good inflation data before considering rate cuts. This, combined with other officials’ comments that a single month’s CPI data cooling off is not enough, dampened market optimism. The dollar index jumped, and most metals in the LME market adjusted overnight, with zinc surging and then falling sharply to close down 0.38% at $3123.

While profits at the mining end have recovered and overseas mines are gradually releasing news of resumption, the significant drop in processing fees has directly triggered deepening market expectations of raw material shortages. Additionally, the domestic central bank’s unexpectedly favorable real estate policies have led the market to be optimistic about economic recovery and consumption prospects, further pushing zinc prices stronger. However, the overall impact on the non-ferrous metals sector still influences the funding side. Thus, SHFE zinc saw limited gains at the opening today, and the rise in spot zinc prices is expected to narrow.

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