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SunSirs: Zinc Market in 2019 Sino US Trade War

December 27 2019 13:07:23     SunSirs (Linda)

According to the data monitoring of SunSirs, the price of zinc rose first and then fell in 2019, and the overall price of zinc fell sharply throughout the year. Zinc prices rose only slightly in the first quarter, after which zinc prices continued to fall, with no rebound. Such a market is inseparable from the macro-economic environment in 2019.

Due to the chemical characteristics of zinc products, zinc is widely used in all aspects of production and life. Zinc ingot is mainly used for raw materials such as galvanized sheet, zinc alloy, zinc oxide, etc., and is finally widely used in automobile manufacturing, construction, shipbuilding, light industry, machinery and other industries. Automobile manufacturing, construction, marine machinery and other industries are closely linked with the

macro-economy, or the indicator of the trend of macro-economy. Therefore, the trend of macro-economy in 2019 is one of the main factors affecting the price of zinc in 2019, and the Chinese economy in 2019 can be summarized as the industrial upgrading under the influence of trade war.

Since the US President trump announced on March 22, 2018 that he would impose large-scale tariffs on US $60 billion worth of goods imported from China, the Sino US trade war has gradually escalated. In 2019, under the haze of Sino US trade war, China's manufacturing boom index fell in an all-round way.

1. China manufacturing PMI

From the statistics of the National Bureau of statistics, it can be seen that the purchasing manager index (PMI) of China's manufacturing industry in 2019 is less than 50% for most of the time, indicating that the manufacturing industry in 2019 is in recession and the downward pressure on the manufacturing industry is large. At the beginning of the year, the PMI in March and April was ≥ 50%, and the manufacturing industry was in the expansion range, which was also the rising range of zinc price in 2019. After that, the PMI of China has been lower than 50%, and the zinc price has not recovered from high.

2. Domestic automobile production in 2019

The impact of Sino US trade war on China's domestic economy is also reflected in the decline of automobile production. In 2019, China's automobile production dropped significantly, and the automobile production dropped more than 10% year-on-year for four consecutive months.

The market of automobile industry is weak, the demand for zinc in automobile manufacturing is obviously reduced, and the market of zinc is bad. The biggest drop in auto production was in zinc prices.

3.  Future forecast

On December 13, 2019, China and the United States reached an agreement on the first phase of China US economic and trade agreement on economic and trade issues. At the end of the Sino-U.S. trade dispute, it is expected that China's macroeconomic environment will recover in 2020, and it will rise in real estate, automobile and other aspects compared with 2019, which will greatly benefit the zinc market in 2020. But in 2020, zinc market will not simply stop falling and pick up with the improvement of macroeconomic environment. Due to the high processing cost of zinc concentrate in 2019, the production enthusiasm of zinc smelting enterprises has been improved, and the zinc production in 2019 has increased significantly. From January to November 2019, the total zinc production has reached 5.692 million tons, up 9.0% year on year. In 2019, the zinc output rose sharply year on year, but the weak demand led to the existence of a large number of zinc stocks in the zinc market in 2019, which had some resistance to the rise of zinc price in the future. In November 2019, the macro-economic environment picked up, and the price of zinc did not rise, that is, the social stock of zinc offset the rising momentum.

Generally speaking, analysts of zinc data of business association believe that in 2019, the price of zinc fell sharply due to the drag of macroeconomic downturn, while the high processing fee of zinc concentrate led to a substantial increase in zinc production, and in 2019, the domestic zinc market severely oversupplied. In 2020, with the understanding of Sino US trade dispute, China's macro-economic environment has recovered, and the demand of zinc market is expected to rise sharply, which is good for zinc market; however, the oversupply of zinc market is bad for zinc price to some extent, and the power of zinc price rise is weakened. Zinc price is expected to rise slightly in 2020.

In addition to macro-economy, zinc investors can also pay attention to automobile production and sales, real estate investment and sales, zinc processing fees, zinc production and other information.

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