SunSirs: Global Inventory Backlog is Serious, Zinc Price Rises with Insufficient Support

1. Zinc price trend

According to SunSirs data monitoring, zinc prices have fluctuated upwards since August. Before August 20, zinc prices did not fall continuously in August. On the 21st and 24th, the price of zinc fell for two consecutive trading days. What does it indicate to the zinc market? Can the zinc market continue its upward trend?

2. From January to June 2020, the global zinc market has an oversupply of 177,000 tons

The World Bureau of Metal Statistics (WBMS) released a report showing that the global zinc market has an oversupply of 177,000 tons from January to June 2020, and a supply shortage of 74,000 tons for the entire year of 2019. During the period from January to June, the reported inventory increase was 149,000 tons, including a net increase of 70,000 tons in Shanghai. From January to June, LME inventories increased to 71,000 tons higher than the level in December 2019. Affected by the epidemic, demand in the global zinc market has declined severely, while inventories have increased sharply. The zinc market has insufficient upward momentum and greater downward pressure.

3. LME market inventory

As of August 24, the zinc ingot inventory in the LME market was 225,075 tons, which was a sharp increase from the 188,050 tons of zinc ingot inventory at the beginning of the month (August 1). The severe overstock of zinc ingots in the international market affects the further rise of zinc prices in the international market, which drags down the rise in the domestic zinc market and is negative for domestic zinc prices.

4. Analysis, summary and outlook

SunSirs analysts believe that: from the statistical data, it can be seen that the global zinc market is overstocked and the oversupply of zinc ingots in the international market is severe, which is negative for the domestic zinc market. As the global economy resumes production and work, zinc market demand picks up, and zinc prices have upward momentum. However, the backlog of zinc ingot inventories in the first half of the year will be concentrated on the market, which will have a negative impact on zinc prices and insufficient support for zinc market rise. The zinc market is expected to fluctuate and maintain stability.

Related listed companies: Zhongjin Lingnan (000060), Chihong Zinc Germanium (600497).

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