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SunSirs: Chinese Zinc Market Rose Stepwise in July, the Outlook is Wary of Downside Risks

August 03 2020 08:28:08     SunSirs (Linda)

Zinc price trend

According to SunSirs data monitoring, the zinc price trend in July is divided into several stages: July 1st-July 8th shock and stability phase; July 9th-July 13th the first wave of rapid rise stage; July 14th -July 27th shock adjustment stage; July 27th-July 31st rapid rise again. As of July 31, the average zinc price was RMB 1,8980.00/ton, an increase of RMB 1,7080.00/ton on July 1, an increase of 11.12%.

Domestic appliance retail scale reached 369 billion yuan in the first half of the year

On July 27, the "Report on China's Home Appliance Market in the First Half of 2020" released by the China Electronics Information Industry Development Research Institute showed that the retail sales of my country's home appliance market in the first half of the year was 369 billion yuan, a 14.13% decrease from the same period last year. In the second quarter, the total retail sales of my country's home appliance market reached 248.6 billion yuan, twice that of the first quarter, an increase of 2.64% year-on-year. Affected by the epidemic, domestic appliance consumption fell sharply in the first quarter. With the resumption of work and production in the second quarter, consumption resumed and there was a certain amount of retaliatory consumption, which led to a year-on-year growth in household appliance consumption in the second quarter. It is expected that household appliance consumption will resume rationality in the third quarter. The main downstream of zinc ingot consumption, the zinc market demand is expected to stabilize, which weakens the zinc market.

Domestic zinc production

The output of zinc ingots in the domestic zinc market rose year-on-year in the first half of the year, but the growth rate slowed down month by month. The zinc market's supply growth has slowed down significantly, the risk of oversupply in the zinc market has decreased, and the risk of supply shortage in the zinc market has increased.

Zinc inventory in Shanghai market

The zinc ingot inventory on the Shanghai Futures Exchange decreased slowly in July, and the futures inventory also declined slightly, and the domestic zinc market supply decreased. With the recovery of the domestic economy, the demand for zinc ingots has gradually increased, and the pressure of shortages in the zinc market has increased.

LME market zinc inventory

Zinc ingot inventories in the LME market fluctuated slightly in early and mid-July. Affected by the epidemic, zinc mines stopped more production, zinc market supply decreased, and zinc ingot inventories decreased. However, since late July, zinc market inventories have surged, and the zinc market has increased the pressure of oversupply. Affected by the epidemic, the global economy is seriously weak, and the economic recovery in the second half of the year is not satisfactory, and the demand for the zinc market is relatively negative. The risk of oversupply of zinc ingots surges in the future.

China Manufacturing Purchasing Manager Index

According to data released by the National Bureau of Statistics of China: In July, China’s Manufacturing Purchasing Managers’ Index (PMI) was 51.1%, an increase of 0.2 percentage points from the previous month, and was above the threshold for five consecutive months. China’s economic prosperity continued to recover and business operations Continuously improve. The improvement of the macroeconomic environment is good for the zinc market, which has a certain upward momentum.

Zinc concentrate processing fee

In July, domestic zinc concentrate processing fees rose sharply, ranging from 200-500 yuan/ton. The increase in zinc concentrate processing fees and the increase in the cost of zinc ingots are positive for the zinc market, and the zinc market has increased momentum.

Analysis summary

SunSirS analyst believes that since July, zinc concentrate processing fees have risen sharply, zinc ingots have increased momentum, the domestic economy has recovered, and the demand for zinc in the zinc market has rebounded. Zinc prices are supported by rising zinc prices, and the domestic zinc market inventory has continued slightly The decline is a concrete manifestation of the recovery in zinc market demand. However, while we are paying attention to the rising momentum of the zinc market, we should also pay more attention to the risks of the zinc market. After the sharp rise in the zinc market in July, the price of zinc is relatively high, and the international market is affected by the epidemic, and the risk of oversupply in the zinc market has increased. The LME market Inventory surges, and the risk of a downturn in the zinc market surges. The downward pressure on zinc ingots will increase. Generally speaking, the zinc market is positive to support the tiered rise of the zinc market in July, but the risk of the zinc market falling in the future is greater. The market outlook for zinc prices should avoid chasing highs and be wary of downside risks.

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

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