SunSirs: Supply and Demand are Improving, Zinc Market Rises Cautiously

1. Zinc price trend

Zinc prices fluctuated and adjusted in March, and the zinc market rose weakly. As of March 24, the average zinc price was 21,843.33 yuan/ton, which was a slight increase of 1.10% compared with the zinc price of 2,1606.67 yuan/ton on March 1. The zinc market rose cautiously.

2. Domestic zinc market

According to data released by the National Bureau of Statistics, China's zinc ingot output has reached 1.075 million tons in January-February 2021, a cumulative year-on-year increase of 2.8%. China's imports of refined zinc from January to February increased by 60% year-on-year to 87,345 tons. The increase in the output of zinc ingots, the sharp increase in refined zinc imports, and the increase in the supply of the domestic zinc market, are negative for the zinc market.

The Inner Mongolia Autonomous Region has issued a dual control target task for energy consumption in 2021. It has determined the target task of reducing the energy consumption per unit of GDP of the entire region by 3% and controlling the increase in energy consumption within 5 million tons of standard coal in 2021. The growth rate of total energy consumption is controlled at around 1.9%, and energy consumption per unit of industrial added value (equivalent) drops by more than 4%. Increased energy consumption control in various parts of the country will have a certain impact on the production of mines and other enterprises. Some zinc mines have been closed, but the impact of the closed output is limited compared to the overall output.

According to the survey data at the beginning of March, among the 130 galvanizing production enterprises, 51 production lines were shut down for maintenance, and the overall operating rate was 80.83%; the capacity utilization rate was 71.53%, an increase of 1.84% from last week; the weekly output was 860,400 tons , An increase of 22,100 tons from last week; among the 47 color coating manufacturers, 9 production lines were shut down for maintenance, and the overall operating rate was 91.89%; the capacity utilization rate was 77.4%, an increase of 3.51% from last week; the weekly output was 21.41 Tons, an increase of 9700 tons from last week; the stock of coated coil warehouses in major domestic markets: 1.29 million tons of galvanized steel, an increase of 38,500 tons; The total stock of coatings increased by 51,300 tons on a week-on-week basis of 1.5605 million tons. It can be seen from the statistical data that the output of the downstream industrial chain in the zinc market is rising, the downstream operating rate is slowly rising, the demand for the zinc market is rising, and the zinc market is positive.

3. Zinc imports

According to data released by the General Administration of Customs, from January to December 2020, China's zinc ore imports reached 3.707 million tons, a year-on-year increase of 21.1%. In January-February 2021, China's zinc ore and concentrate imports totaled 680,100 physical tons, China's zinc ingot imports from January to February totaled 88,200 metal tons, and China's unwrought zinc alloy imports from January to February The cumulative total is 10,500 tons. In 2020, the domestic zinc ore import volume will increase sharply, and the zinc market will have sufficient supply. However, from January to February 21, the zinc market import volume will be stable. The zinc market is generally adequate in supply.

4. Zinc processing fee

Due to the tight supply of mines, the processing fee paid by miners to smelters for refined zinc has dropped from US$300/ton a year ago to US$200/ton in 2021. China's domestic zinc concentrate processing fee dropped to 3,600-4,200 yuan/ton in March, which is the lowest level since September 2018, and much lower than the 6,500 yuan/ton in early 2020. Lower processing fees may force zinc smelting The factory cut production. The output of zinc smelters has decreased, the supply of zinc market has decreased, and the market of zinc market has risen.

5. Analysis

Recently dragged down by the epidemic, the EU's economic recovery has been frustrated, the non-ferrous sector is under pressure and the zinc market has weakened. However, in the long run, the strengthening of domestic energy consumption control has restricted the increase in zinc production to a certain extent, and the low processing fees of zinc concentrates have also discouraged the enthusiasm of zinc smelting enterprises. The increase will ease the decrease in the supply of the domestic zinc market, and the zinc market will generally have sufficient supply. However, the downstream of the zinc industry chain started to rise, the demand for zinc ingots slowly recovered, and the supply of zinc in the market outlook is still tight. The zinc price is expected to fluctuate slightly in the future, and the zinc market is cautiously optimistic.

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

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