Latest Update in the SMM Zinc Market

In April, China's exports of unwrought zinc alloy surged, with a MoM increase exceeding 450%, hitting a new high in nearly a decade. In contrast, imports saw relatively small changes. Below are the specifics.

From the raw material supply side, orders in the automotive and home appliance sectors remained robust in April and May, while demand from real estate and infrastructure projects was weak. Overall, steel mill orders were moderate, but with relatively good profits, steel mills had a high willingness to produce, and steel ash production did not decrease. However, as steel mills' recycling capacity improved, the zinc grade of steel ash declined. Additionally, starting in April, stricter standards for steel ash recycling and emissions were implemented, increasing the difficulty of purchasing raw materials. This led to an undersupply in the steel ash market, making it difficult for low-grade zinc oxide manufacturers to maintain a stable supply. Some low-grade zinc oxide enterprises halted production to accumulate raw materials starting from the Chinese New Year and only resumed production in May. Steel ash prices remained high, causing low-grade zinc oxide prices to rise.

[What are the reasons for the increase in the coefficient of low-grade zinc oxide?] What are the reasons for the recent price increase of low-grade zinc oxide? How will it develop in the future?

[Premiums Continue to Decline, Market Transactions Remain Average]: This week, spot premiums in Tianjin continued to decline, falling by approximately 85 yuan/mt WoW. As of Friday this week, domestic common brands were quoted at premiums of 200-230 yuan/mt against the 2506 contract, while high-end brands were quoted at premiums of 250-280 yuan/mt against the 2506 contract. Tianjin was quoted at a discount of approximately 10 yuan/mt against Shanghai.

[SHFE/LME Price Ratio Rises Near 8.5, Zinc Ingot Import Window Closes]: This week, the SHFE/LME price ratio rose near 8.5, and the zinc ingot import window closed. From an overseas perspective, Moody's downgraded the US credit rating from Aaa to Aa, and market sentiment about the economy continued to rise. Later, Bostic reiterated his preference for only one interest rate cut this year, and LME zinc declined amidst sentiment and low expectations for interest rate cuts.

[Production of some early orders commenced, operating rates of galvanising producers slightly increased]: This week, the operating rate of galvanising producers reached 62.03%, up 1.08 percentage points WoW. In terms of raw material inventory, zinc prices fluctuated and consolidated this week, with some downstream enterprises slightly restocking, leading to a slight increase in zinc ingot inventory.

[This week, the zinc price on both SHFE and LME maintained a fluctuating trend due to the resonance between fundamental and macro front factors] At the beginning of the week, influenced by the lingering market uncertainties, LME zinc continued its fluctuating trend from last week; subsequently, Moody's downgraded the US credit rating from Aaa to Aa, ending its highest rating for the US since 1917, which intensified market concerns. Meanwhile, Bostic reiterated his preference for one interest rate cut this year, and LME zinc declined amidst the sentiment-driven and low interest rate cut expectations...

[Zinc Oxide Operating Rates Decline Due to Plant Maintenance] This week, the operating rate of zinc oxide was recorded at 62.03%, down 0.38% WoW. The decline in operating rates was mainly due to plant shutdowns for maintenance by some enterprises during the week. On the raw material side, zinc prices maintained a fluctuating trend this week, with some enterprises purchasing small quantities at low prices, leading to a slight increase in inventory...