As of September 10th, the price of 0 # zinc was 27529 yuan/ton, an increase of 2.16% from the zinc price of 26948 yuan/ton on September 1st.
fundamentals
In early September, zinc prices showed an accelerated upward trend, becoming the strongest performer in the non-ferrous metal sector. The core logic of this round of price increase lies in the substantial transmission from tight mines to tight ingots. In terms of trend rhythm, the first half of the year showed a pulse like characteristic of “rising slightly, stepping back slightly, and then rising again”. Overall, the zinc price center in the first half of the year has significantly increased compared to the end of August, but spot market transactions have almost stagnated, and downstream consumers generally adopt a wait-and-see attitude towards high prices. Spot prices remain at a discount, and futures prices have risen significantly faster than spot prices.
Supply side:
As of early September, the weekly processing fee for domestic zinc concentrate has decreased by 300 yuan compared to the previous period, and the processing fee index for imported zinc concentrate has dropped to -124.5 US dollars per dry ton, both at historically low levels. A negative processing fee depth means that smelters not only cannot profit from processing fees, but also have to bear costs. Coupled with the decline in the price of by-product sulfuric acid, smelting losses continue to expand, and multiple refineries (in Guangxi, Henan, Inner Mongolia, Sichuan and other places) have experienced sudden maintenance and production cuts.
Domestic zinc ingot inventory experienced an unexpected decline in the first half of the year. The core driving force for the rapid clearance of inventory is the opening of the export window – after the Shanghai London ratio fell below the critical threshold of 7.0, the profit window for zinc ingot export sales and delivery officially opened, and a large number of domestic zinc ingots flowed into overseas markets. This’ inventory transfer ‘behavior has caused a temporary shortage of domestic spot goods in the short term, but the majority of the destocking volume is for export sources rather than the actual digestion of terminal consumption.
Demand side:
The weighted operating rate of downstream primary processing enterprises is only 51.44%, which is at a low level in the past five years. The high-frequency production of galvanized structural parts, die-casting zinc alloys, and zinc oxide has all declined. The overall performance is weaker than seasonal. After the zinc price rose to 26000 yuan/ton, there was a strong fear of high prices and cautious procurement in the downstream market. Spot trading in Guangdong was sluggish, and galvanizing and die-casting alloy factories had low purchasing intentions. Terminal hardware accessory factories faced the risk of production reduction and shutdown. Galvanized pipe manufacturers have also postponed their production schedule for September due to low terminal consumption and high zinc cost. Terminal real estate remains the main drag, and although infrastructure orders have resilience, they have not yet formed a synergy.
The current logic chain supporting zinc prices, including tight mining, reduced smelting production, and domestic destocking, is still intact, and there have been no false signals in the short term. Weak follow-up of spot prices: After the rapid rise in zinc prices, downstream sentiment of fear of high prices has intensified, spot prices remain at a discount, terminal order growth is limited, and peak season consumption has not yet been fully realized. Driven by the price difference between domestic and foreign markets, the maintenance plans of some domestic smelters have been postponed again, and the actual production reduction in September may be lower than expected. Short term zinc prices are likely to maintain a pattern of high volatility and strong bias. Currently in the stage of “strong trend+high skill buying”, it is not advisable to chase after the rise. In the early stage, if you place multiple orders, you can consider taking profits on the high portion and wait for the price to stabilize after hitting the 10 day or 20 day moving average before looking for a technical entry point to buy on dips.
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