As of August 10th, the price of 0 # zinc was 25493 yuan/ton, an increase of 1.70% compared to the zinc price of 25067 yuan/ton on August 3rd.
fundamentals
August was traditionally the off-season for consumption, but the zinc market experienced a remarkable upward trend. Terminal demand is usually weak, and zinc prices often operate under pressure. However, in early August this year, zinc prices went against the trend and strengthened, breaking out of the independent market trend of “not being weak in the off-season”. Behind this abnormal trend is the result of multiple tightening measures on the supply side and periodic resonance on the demand side.
Supply side: “Four Tightening”
Comprehensive tightening of supply at the mining end
The fundamental driving force behind the current increase in zinc prices comes from the mining sector. The processing fee for domestically produced zinc concentrate has dropped to a historical low of -1150 yuan/metal ton, and the import TC has dropped to -98 US dollars/dry ton. Smelters need to pay back fees to obtain raw materials, which is extremely rare. Global mining production expectations continue to decline, with guidance from Glencore and Tektronix lowered, compounded by external disturbances such as railway disruptions in Australia, energy crisis in Peru, and geopolitical conflicts in Iran. On August 1st, a safety accident occurred at the Fankou lead-zinc mine in China, resulting in production stoppage and further reduction of the available zinc concentrate in the country. The mining end tightens from both internal and external directions, directly raising the cost of smelting raw materials and providing solid bottom support for zinc prices.
Smelting losses force production cuts
The extremely low processing fees have caused widespread losses in the smelting process, although the increase in the prices of by-products such as sulfuric acid and zinc has compensated for it, the overall loss pressure is still high. Small and medium-sized smelters are scheduled for maintenance in advance, which limits the monthly output increase of refined zinc. The maintenance cycle in the third quarter continues, and the tension in the mining end is accelerating towards the smelting end. It is difficult to restore the supply of refined zinc, and the supply elasticity is significantly compressed.
The trend of internal and external inventory is differentiated, and overseas structural risks are prominent
LME zinc inventory continues to deplete. Domestic social inventory is hovering at a high level, with slow turnover. The differentiation between internal and external factors has led to a weakening of Shanghai’s supply chain, resulting in the closure of the import window and difficulty in supplementing the domestic market with imported zinc ingots, further compressing the domestic supply elasticity.
The “four clues” on the supply side are tightening simultaneously, forming a resonance
The low processing fees at the mining end, the relocation of smelter maintenance, the risk of centralized squeezing of London warehouse receipts, and the closure of import windows – these four clues have tightened simultaneously within the same time window, compressing the supply elasticity of the zinc market to the lowest level in recent years. Mutual reinforcement between each other: tight mining pushing up costs → refinery losses leading to reduced production → depletion of overseas inventory exacerbating expectations of warehouse crowding → import obstruction unable to make up for the gap. The combined effect of the four tightening measures has become the core fundamental support for the counter trend strengthening of zinc prices this week.
Demand side: ‘Weak reality’ remains unchanged, but marginal improvement is expected
It should be objectively pointed out that the overall demand side is still in a low season pattern. Downstream galvanized sheet inventory is still accumulating, with a low operating rate; The die-casting zinc alloy, zinc oxide and other sectors are still at a low level during the off-season; Real estate infrastructure orders are flat, with terminal demand mainly entering the market. The trading atmosphere in the spot market gradually weakened after the prices continued to rise, and downstream enterprises were affected by the off-season of consumption and high zinc prices, resulting in a significant lack of purchasing enthusiasm.
However, as the traditional peak consumption season of “Golden September and Silver October” approaches, expectations for downstream replenishment are heating up. The market is shifting from “weak reality” to “peak season expectations”. The marginal improvement expectation on the demand side has become an important driving force for the upward trend of zinc prices.
Comprehensive analysis: Supply logic leads, alert to high-level risks
The core logic behind the abnormal increase in zinc prices during the off-season can be summarized as follows: the supply side tightened four times, forming a bottom support for prices: tight mining, reduced smelting, low inventory, and import resistance. The demand side resonated with galvanized and infrastructure orders, and downstream replenishment provided temporary upward momentum. The two resonated within the time window of early August.
The previous market is currently in a fierce game of “strong supply side support” and “weak demand side reality”. The story of the supply side provides a solid bottom for zinc prices, but whether the demand side can move from “marginal improvement” to “substantial recovery” will determine the space and sustainability of zinc price increases.
| http://www.lubonchem.com/ |