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SunSirs: Zinc Price Hit Cost Line, the Market Adjusted for Weak Shocks

March 18 2020 09:10:32     SunSirs (Linda)

1. Price trend

According to the data monitoring of SunSirs, the recent zinc market fluctuations adjusted, and the zinc price fell slightly in March. As of March 17, the spot price of zinc was 15,756.67 yuan/ton, which was a decrease of 3% compared with the zinc price of 16,243.33 yuan/ton at the beginning of the month. Zinc prices fell slightly, and the zinc market was negative.

2. Market trend

Domestic zinc inventory

Data released from the Shanghai futures market show that in March the zinc market inventory fluctuated and the zinc market inventory growth rate slowed down significantly. With the gradual recovery of downstream operations, downstream demand has risen, and domestic zinc market demand has risen; although domestic logistics and transportation have gradually recovered, the zinc ingot trade is in general and has not resumed previous years. In general, the zinc market has ample supply, and recent demand has picked up. The zinc market is oversupplied, and the zinc market is negative.

Value added of industries above designated size decreased by 13.5% from January to February

Data from the National Bureau of Statistics show that from January to February, the added value of industries above designated size actually decreased by 13.5% year-on-year. From a month-on-month basis, in February, the added value of industries above designated size fell by 26.63% from the previous month. From the perspective of the industry, from January to February, the non-ferrous metal smelting and rolling processing industry fell by 8.5%, the automobile manufacturing industry fell by 31.8%, the railway, ship, aerospace and other transportation equipment manufacturing industry fell by 28.2%, and the electrical machinery and equipment manufacturing industry From the perspective of products, from January to February, there were 9.35 million tons of ten non-ferrous metals, an increase of 2.2% year-on-year; 2.005 million vehicles, a decrease of 45.8%. From the industry and product data, it can be seen that from January to February, the domestic non-ferrous metal smelting industry was less affected, and the output of non-ferrous metals rose slightly; however, the automobile manufacturing, railway, shipbuilding, infrastructure, and machinery manufacturing industries were affected. More seriously, these industries are the main users of zinc downstream. Among them, the automotive industry is directly cutting down, down 45.8%. The downstream demand for zinc ingot has fallen sharply, which is negative for the domestic zinc market.

Multiple zinc ore capacity developments

Brentin Mining has suspended construction and commissioning activities directly related to the Neves-Corvo Zinc Mine Expansion Project, and recovery time is to be determined.

The mining company Impulsora Minera Santa Cruz has decided to suspend operations of the same-named silver-lead-zinc mine in Zacatecas, Mexico, because the Federal Environmental Protection Agency is conducting an environmental investigation.

Silvercorp Metals Inc (TSX: SVM), a silver-lead-zinc miner in Vancouver, Canada, said that as of now, the company ’s Ying mine in Henan Province, China and the GC mine in Guangdong have restored 94% of its planned capacity, and the inventory can meet one Production demand over the month.

As the Italian government has now ordered, activities in all regions of the country will be restricted. Alta Zinc has suspended drilling for the Gorno Zinc Project in the country.

Zinc concentrate processing fee

As can be seen from the table, the processing fee of zinc concentrate in March was around 6,200-6,400 yuan / metal ton. Although the processing fee has declined slightly recently, it is still at a high level. Compared to the price of zinc ingot, the processing fee accounts for up to 40%. The proportion of zinc concentrate processing fees has increased, the space for zinc ingots to decrease has decreased, and the upward pressure on zinc ingots has increased.

3. Outlook

SunSirs analysts believe that the domestic economic performance in February was weak, and the demand for zinc ingots fell sharply, while the production of zinc ingots was less affected. The zinc concentrate processing fees remained high in March, and the cost of zinc ingots remained high. Ingot prices hit the cost line, and there is limited room for zinc prices to fall. However, due to the lack of improvement in zinc market demand, despite favorable national policies, the recent resumption of work by downstream companies and the recovery of zinc ingot demand, the global economic situation has deteriorated and the global zinc market has been severely damaged. The short-term rise in the domestic zinc market is difficult to offset the international zinc market The decline in global zinc market demand is expected to decline severely. The domestic zinc market has undergone shock adjustments under the dual pressure of a better domestic zinc market environment and a worsening international environment. At the same time, due to the serious backlog of zinc inventories, it is expected that the zinc market in the future will be adjusted for weak fluctuations.

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

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