Zinc prices rose first and then fell in March
According to the Commodity Market Analysis System of Shengyishe, as of April 1st, the price of zinc was 20832 yuan/ton, which increased and then decreased compared to March 1st’s zinc price of 20586 yuan/ton, with an increase of 1.19%; Compared to March 14th, the zinc price of 21434 yuan/ton decreased by 2.81%. The production of zinc mines has decreased, the concentration of zinc concentrate has decreased, and the supply of zinc in March has decreased. The macroeconomic recovery is less than expected, and the support for the increase in zinc prices is insufficient. In March, zinc prices first rose and then fell.
The supply of zinc in the market is decreasing
According to foreign news on March 6th, South Korea’s Young Poong Corp stated that it has reduced the production of its Seokpo zinc smelter by one-fifth. The Seokpo zinc smelter produces 400000 tons annually and is the sixth largest zinc smelter in the world. A large-scale production reduction or complete closure will reduce the expected surplus of 300000 tons this year, leading to a shortage in the zinc market. Expected reduction in zinc supply in the market.
Luoping Zinc Electric announced that on March 7, 2024, the company received a production shutdown notice from the Luoping County Emergency Management Bureau. According to the production suspension notice, the company’s Fule Lead Zinc Mine will cease all production activities from today onwards. In addition to the shutdown of Fule Lead Zinc Mine, other mines of Luoping Zinc Power are also in a state of shutdown. Industry insiders have pointed out that due to the increasingly strict regulatory environment, the resumption of production at the Luoping Zinc Electricity Mine may take more than a year for the relevant mines to complete. In addition to Luoping Zinc Power, there are plans for smelter maintenance and production reduction in regions such as Hunan, Sichuan, Guangxi, Yunnan, Liaoning, and Gansu, which are expected to affect a reduction of nearly 30000 tons. Zinc smelters have reduced production and increased demand, leading to a decrease in zinc supply in the market.
According to statistics from the General Administration of Customs, the import volume of zinc concentrate in China in January 2024 was 395900 tons, a decrease of 10.4% month on month and 8.18% year-on-year. In February 2024, the import volume of zinc concentrate was 251200 tons, a decrease of 36.56% month on month and 46.69% year-on-year. The cumulative import volume of zinc concentrate from January to February 2024 was 647100 tons, a year-on-year decrease of 28.28%. The import volume of zinc concentrate has decreased, and the supply of zinc concentrate is tight. The processing cost of zinc concentrate decreased in March, and the supply of zinc in the market was tight.
The demand growth in the zinc market is lower than expected
China has entered the traditional consumption peak season of “gold, silver, and four”, with expected recovery in demand, boosting the rebound of non-ferrous metals. During the two sessions, the market waited for positive news, and overall macroeconomic sentiment rebounded. The domestic macroeconomic situation was positive, while the non-ferrous metal market was positive.
During the Two Sessions, environmental protection in the north has imposed production restrictions, and galvanized processing enterprises have reduced production significantly. The current production restrictions have not yet ended, and the consumer recovery is not as expected. Downstream sentiment towards accepting goods is not good, and there is no significant improvement in spot trading. The downstream production of zinc in the Tianjin market is limited by environmental protection, and the order volume is relatively poor, resulting in insufficient willingness to purchase zinc ingots; The transaction volume of zinc ingots in the Foshan market is also very low. Overall, the environmental impact has led to poor downstream production of zinc and lower than expected demand in the zinc market.
The Swiss central bank announced a 25 basis point rate cut and adjusted the benchmark interest rate from 1.75% to 1.5%. The sudden shift in monetary policy by the Swiss central bank may lead to a series of chain reactions. The US PMI data released by S&P Global and Research shows that the initial value of Markit’s manufacturing PMI in March was 52.5, and the initial value of Markit’s comprehensive PMI in March was 52.2. The US manufacturing business activity in March showed strong performance, setting the fastest growth rate in nearly two years. In the past two weeks since mid March, the US dollar index has continued to rise, with macroeconomic recovery. However, inflationary pressure still exists, and the macroeconomic weakness in the zinc market remains. The demand growth in the zinc market is not satisfactory.
Future Market Forecast
According to data analysts from Business Society, in terms of supply, there were many reports of zinc mines and zinc smelters shutting down and reducing production in the international and domestic markets in March, leading to a significant decrease in zinc supply and stimulating an increase in zinc prices; However, in terms of demand, March was originally the traditional peak season for consumption, but during the Chinese People’s Congress and Chinese People’s Political Consultative Conference, northern environmental protection limited production. In addition, the recovery of enterprises after the conference was less than expected, and the macroeconomic recovery in the international market was less than expected, resulting in poor demand growth in the zinc market. In the future, the domestic zinc market is accumulating reserves, and the environmental protection restrictions on production in the zinc market are gradually slowing down. The supply and demand expectations for zinc in the market are increasing. However, as the Qingming Festival approaches, the growth of demand for zinc in the market is limited, and it is expected that zinc prices will be weak and volatile in the future.
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