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SunSirs: Chinese Economy Picks up, Zinc Prices Fluctuate and Rise

May 06 2020 08:44:47     SunSirs (Linda)

1. Price Trend

SunSirs data monitoring shows that the zinc market rebounded in April and zinc prices fluctuated. As of April 30, the spot price of zinc was 16,646.67 yuan / ton, which was an increase of 7.523% from the beginning of the month at 15,523.33 yuan / ton. In April, domestic enterprises resumed increasing work, the zinc market was favorable, and the overall zinc market was on the rise.

2. Market Trend

LME market

As can be seen from the LME price chart, the price of zinc ingots in the LME market fluctuated in April, while the supply and demand in the international market both declined. The overall international zinc market has fluctuated steadily, which is positive for the Chinese zinc market.

Shanghai market zinc inventory

As can be seen from the table, the stock of zinc ingot in Shanghai's futures market fell sharply in April last week, and the stock of futures fell sharply. The supply of the domestic zinc market fluctuated and fell, and demand continued to pick up. In general, the Chinese zinc market is more favorable, and the zinc market is gradually picking up.

Domestic zinc production

As can be seen from the table, domestic zinc ingot production maintained a substantial growth in the first quarter, and the COVID-19 had a little effect on it. Domestic zinc concentrate processing fees are still at a high level, zinc smelting enterprises are still active in production, zinc ingot production continues to increase, the zinc market is still in oversupply, and the downward pressure on the zinc market remains.

China Manufacturing PMI

Statistics from the National Bureau of Statistics show that in April, China's Manufacturing Purchasing Managers Index (PMI) was 50.8%, down 1.2 percentage points from last month. In April, the manufacturing and operating conditions of the manufacturing industry continued to improve from the previous month, but the expansion efforts have weakened. In April, the resumption of production and production of enterprises continued to advance, and large, medium and small enterprises maintained a recovery trend, but the overall demand recovery was weaker than production, and due to the sharp contraction of global economic activity, the uncertainty of the import and export increased. The overall domestic economy is picking up, which is good for the zinc market; the international market is at greater risk and the zinc market has limited upside potential.

3. Outlook

SunSirs analysts believe that the domestic zinc market is generally favorable in April, as the domestic economic production continued to improve in April. The zinc market has slowly recovered, the domestic zinc ingot output has steadily increased, the zinc market is still oversupplied, and the domestic zinc market has insufficient momentum to rise. In terms of the international zinc market, the market fluctuated and shrunk. The international zinc market lacked momentum to increase and the lower pressure was heavy. Due to the COVID-19, zinc mines stopped production and reduced production, and downstream industries such as automobiles also basically stagnated. The overall supply and demand of the international zinc market declined. Moreover, at this stage, global transportation is restricted, and the import and export of international zinc ingots are greatly hindered. The impact of international zinc prices on domestic zinc prices has weakened. Generally speaking, with the resumption of domestic enterprises in the domestic zinc market, the demand of the zinc market has gradually increased, and the zinc market has a certain upward momentum. It is expected that the zinc price in the future market will slowly rise; but as the oversupply of the zinc market is still serious, the zinc market has no sharp risen space, zinc prices are expected to rise slightly and volatilely in the future.

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

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