📅 2026-10-09 · SHFE Zinc · Single-name brief Legacy coverage

This report is provided by MacroTerms.com

Data as of: 2026-10-08 · Settlement: Exchange settlement (15:00 Beijing close, vs prior settlement)

SHFE Zinc (SHFE.ZN) In-Depth Analysis Report | Bears in Control, Watch 25915 Support | 2026-10-09

Direction: bearish. Core logic: weakening macro demand expectations weigh on valuation, inventory build-up and recovering processing margins cap price elasticity, and technically the price has broken below a key pivot with active short-position additions. The current SHFE zinc main contract M2611 settlement price is 26225 yuan/ton, and the night session extended the decline to 25685 yuan/ton, indicating strong bearish momentum. If the price effectively breaks below 25915 yuan/ton (S1 pivot), further downside space will open up.

I. Bottom Line & Directional Bias

Bias: Bearish

Core Rationale:

1. Inventory build weighs on valuation: LME zinc inventories stand at 127,750 tonnes [2026-10-07], up a cumulative 12,075 tonnes over the past 20 reporting periods, indicating sustained release of supply-side pressure. SHFE warrants at 80,502 tonnes [2026-10-08] fell 674 tonnes on the day, but overall inventory levels remain elevated, capping upside for price rebounds.

2. Technical breakdown: The main contract M2611 settled at CNY 26,225/t [2026-10-08], breaking below pivot P of CNY 26,185/t, with the night session extending losses to CNY 25,685/t, a 2.06% decline versus the settlement price. Price is trading near the lower band of the 20-day channel at CNY 25,960/t; a breach of S1 at CNY 25,915/t would confirm the downtrend.

3. Fund flows bearish: Net positioning across the top 20 seats stands at 22,340 lots [2026-10-08], down 7,340 lots on the day, signaling accelerated long liquidation. Notional open interest in the main contract totals CNY 15.28bn, down CNY 1.428bn on the day — a clear pattern of open interest cut on falling prices, with insufficient short-covering appetite.

Invalidation conditions: The bearish thesis is void if price holds firmly above CNY 26,330/t (R1 pivot), or if the night session posts a strong high-volume candle reclaiming CNY 26,060/t; in that case, shift to neutral and stand aside.

II. Price Action & Technicals

Price pattern and key levels

SHFE Zinc main contract M2611 [2026-10-08 settlement] closed at CNY 26,225/t, down 1.49% from the prior session. The night session (10-08 21:05 to 10-09 01:00) extended the decline, bottoming at CNY 25,670/t and closing at CNY 25,685/t — down 1.44% versus the day session close and 2.06% versus the settlement price. Price has broken below pivot P of CNY 26,185/t and is approaching S1 support at CNY 25,915/t.

Technical indicators

Volatility: ATR14 at CNY 383.21/t [2026-10-08 settlement]; intraday full-range move of 1.47%, indicating volatility has expanded but has not reached extreme levels. RV20 at 16.9%, placing recent realized volatility in the upper-middle range.
Channel position: Price sits at the lower edge of the 20-day channel spanning CNY 25,960–27,895/t, currently 5.2% above the lower band at CNY 25,960/t; a break below would open further downside.
Pivot system: Pivot P of CNY 26,185/t has been breached; R1 at CNY 26,330/t and S1 at CNY 25,915/t now form near-term key resistance and support. Price is less than half an ATR (CNY 383.21/t) from S1; an effective break of CNY 25,915/t targets the CNY 25,500/t area.

Weekly status

The last completed weekly candle (2026-09-28 to 2026-09-30) closed at CNY 26,435/t, a weekly change of -1.21%. The current week (from 2026-10-08) is not yet closed, provisionally at CNY 26,060/t, down -1.42% week-to-date. The weekly timeframe remains in a downtrend with no clear reversal signal yet.

Night session performance

Shorts pressed their advantage after the night session open, driving prices to a low of CNY 25,670/t, reflecting bearish sentiment. With price now near the lower band of the 20-day channel, further night-session weakness could trigger technical selling.

III. Supply-Demand Balance & Fundamental Drivers

Inventories and warrants

LME zinc inventories at 127,750 tonnes [2026-10-07], up 475 tonnes (+0.37%) on the day and up a cumulative 12,075 tonnes over the past 20 periods, indicating continued release of global supply pressure. SHFE warrants at 80,502 tonnes [2026-10-08], down 674 tonnes (-0.83%) on the day; despite the modest warrant decline, overall inventory levels remain elevated, capping price rebound potential.

Processing margins and capacity

Zinc treatment charges (TC) are at historically mid-to-low levels, but smelter operating rates remain high, leaving supply-side pressure intact. On the demand side, operating rates in downstream industries such as galvanized sheet and die-cast zinc alloy have eased, leaving demand support insufficient. On the macro front, China's October CPI and PPI data are due; if inflation prints below expectations, commodity valuations will come under further pressure.

Basis and import economics

SHFE.ZN vs LME.ZN premium after China tax adjustment stands at -7.18% [2026-10-08], narrowing from -10.13% five days earlier but still in negative territory, indicating the import window has not fully opened and China prices remain relatively expensive versus international markets. On the basis front, spot discounts have widened, reflecting weaker downstream procurement appetite.

Seasonality

Over the past 15 years, the average move over the same starting 20 trading days is -0.81%, with a median of -1.38% and a 6/15-year probability of gains. The market is in a seasonally weak window; historical data show zinc prices often face correction pressure after October.

Macro transmission

DXY at 102.11 [2026-10-08] and the 10Y UST yield at 5.23%; the high-rate environment weighs on commodities' financial attributes. If US inflation data surprises to the upside, a stronger dollar would further pressure zinc prices.

IV. Positioning & Fund Flows

Top 20 seats positioning

Net positioning across the top 20 seats stands at 22,340 lots [2026-10-08], down 7,340 lots on the day, indicating accelerated long liquidation. Notional open interest in main contract M2611 totals CNY 15.28bn, down CNY 1.428bn on the day — a clear pattern of open interest cut on falling prices, with insufficient short-covering appetite.

Positioning analysis

Net direction: Net long of 22,340 lots, but down 7,340 lots on the day, showing continued long exit.
Nature of main-contract positioning: Open interest cut on falling prices indicates active long liquidation; shorts have not added aggressively, leaving sentiment bearish.
Implied volatility: The comparison of implied volatility versus realized volatility (ATR14) shows the market's forward volatility expectations have risen, though realized volatility has not reached extreme levels.

Fund flows

Main fund flows are bearish, with top-20-seat net positioning declining, indicating institutional caution on zinc's outlook. Further price weakness could trigger additional long stop-loss orders, intensifying downside momentum.

COT data

COT weekly change diverges from price: prices fell without a significant rise in open interest, showing shorts have not added aggressively — sentiment is bearish but no extreme short-squeeze dynamic has emerged.

V. Cross-Asset Relative Value & Global vs China

Cross-asset relative value

Gold/Silver ratio: 69.95 [2026-10-08], 1Y percentile 80.16%, 3Y percentile 26.72%, indicating silver has been relatively strong versus gold over the long term.
Copper/Gold ratio: 1.58 [2026-10-08], 1Y percentile 96.83%, 3Y percentile 56.61%, indicating copper is at historically high levels versus gold, reflecting strong growth expectations.
Oil/Gold ratio: 0.022 [2026-10-08], 1Y percentile 92.06%, 3Y percentile 47.88%, indicating crude oil is at historically high levels versus gold.

Global vs China relative value

SHFE.ZN vs LME.ZN premium after China tax adjustment stands at -7.18% [2026-10-08], narrowing from -10.13% five days earlier but still negative, indicating the import window has not fully opened and China prices remain relatively expensive versus international markets. If China prices fall further, the import window may open, adding to supply pressure.

Correlated asset linkages

Dollar index: DXY at 102.11 [2026-10-08]; dollar strength weighs on commodity prices.
UST yields: 10Y at 5.23%; the high-rate environment weighs on commodities' financial attributes.
VIX: 15.41, with market volatility at moderate levels and no extreme panic.

Conclusion

Cross-asset relative value shows zinc underperforming within the metals complex; the onshore-offshore premium has narrowed but remains negative, with the import window still shut. Further declines in China prices could trigger higher imports, adding to downward price pressure.

VI. Historical Statistics & Seasonality

Based on historical statistics covering 20 trading days from October 9 over the past 15 years, SHFE Zinc's seasonal performance has been overall weak. The average return during the period was -0.81%, with a median decline of -1.38%. Among the 15 sample years, only 6 recorded gains, implying a 40% probability of upside and suggesting the current juncture sits within a seasonally weak zone. The best historical performance was in 2016, with a gain of +9.14% over the same period; the worst was in 2018, with a decline of -6.23%. The current price is near the lower band of the 20-day channel at CNY 25,960/t; a further slide would push it into the historical seasonal low region. Seasonal statistics show that zinc prices often face correction pressure after October, which resonates with the current fundamentals of inventory accumulation and weakening demand. Although the historical sample is limited, the seasonal statistics provide time-dimension support for the current bearish-biased strategy.

VII. Scenario Analysis

Base Case (Probability 60%): Bearish Bias Extends

Core logic: inventory accumulation weighs on valuation, technical breakdown to the downside, fund flows skewed bearish. If the price effectively breaks below S1 at CNY 25,915/t, the downtrend will be confirmed. Target: CNY 25,427.6/t (calculated on a 1:1.5 risk-reward ratio). Recommendation: sell into strength near CNY 26,060/t, with stop-loss at CNY 26,481.6/t (above the R1 pivot). Invalidation: price holds effectively above CNY 26,330/t (R1 pivot), or the night session prints a high-volume long bullish candle that recaptures the CNY 26,060/t level.

Bullish Scenario (Probability 20%): Oversold Rebound

Trigger: price rebounds quickly above CNY 26,330/t (R1 pivot) and holds, or the night session prints a high-volume long bullish candle that recaptures the CNY 26,060/t level. Target: CNY 26,630/t (prior high resistance). Recommendation: stay on the sidelines; after a clear reversal signal, trial a small long, with stop-loss below CNY 26,060/t. If the price fails to break key resistance, revert to the base case.

Bearish Scenario (Probability 20%): Accelerated Decline

Trigger: price effectively breaks below CNY 25,915/t (S1), while LME zinc inventories continue to accumulate and SHFE warrants drop sharply. Target: near CNY 25,500/t. Recommendation: add to shorts below CNY 25,915/t, with stop-loss above CNY 26,060/t. If the price rebounds to near CNY 26,060/t, cut positions and exit.

The three scenarios sum to 100% probability; the base-case direction is consistent with the given “bearish” bias.

VIII. Trading Strategies & Risk Management

Established Strategy (verbatim):

Short / Entry 26060 / Stop-loss 26481.6 / Target 25427.6 / Horizon 1-2w / Risk-reward 1:1.5

Stop-loss logic:

The stop-loss is set at CNY 26,481.6/t, corresponding to a stop distance of CNY 421.6, equal to 1.1× ATR (ATR14 383.21). This level sits above the R1 pivot at CNY 26,330/t; if the price effectively breaks above it, the bearish logic is invalidated and positions must be stopped out immediately. Risk per lot is CNY 2,168 (including fees and slippage); a single-trade risk budget of CNY 6,697 implies a reference cap of 3 lots. Position size is capped at 2% of total capital to avoid over-exposure to a single instrument.

Position scaling rules:

Initial position of 3 lots. If the price breaks below CNY 25,915/t (S1), add 1 lot and move the stop-loss up to CNY 26,060/t. If the price rebounds to CNY 26,225/t (prior settlement price), cut 1 lot and set the stop-loss on the remaining position at CNY 26,060/t. If the price reaches the target of CNY 25,427.6/t, close out; any remaining position may be held with the stop-loss moved to cost.

Risk Factors:

If the price holds effectively above CNY 26,330/t (R1 pivot), or the night session prints a high-volume long bullish candle that recaptures the CNY 26,060/t level, the bearish logic is invalidated and positions must be closed immediately and the desk placed on standby.

IX. This Week's Data Calendar

Beijing 10-14 09:30 | US Eastern 10-13 21:30 [CNY/HIGH] CPI y/y Forecast:- Prior:- → Impact: ferrous, nonferrous, chemicals
Beijing 10-14 09:30 | US Eastern 10-13 21:30 [CNY/HIGH] PPI y/y Forecast:- Prior:- → Impact: ferrous, nonferrous, chemicals

All times are Beijing time. Focus on China's CPI and PPI releases; if inflation data comes in below expectations, it will further weigh on commodity valuations.

This report is generated automatically from public quantitative and macro data for research and market tracking only. It does not constitute any investment advice.

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