SunSirs: Electricity Restriction Upgrades, Stimulating Zinc Prices to Rise

Zinc price trend is generally rising

In July, the zinc market was stimulated by the news of national reserve dumping, and the increase in zinc prices slowed down, but the overall zinc price still fluctuated up; as of July 20, the zinc price rose by 1.61% in July. As of July 20, the zinc price was 22,893.33 yuan/ton, up from 22,530 yuan on July 1, and the zinc price fluctuated upward. The positive stimulus of the zinc market still exists.

The supply is tight, the electricity price is rising, and the power limit is upgraded again

After entering July, electricity consumption in high-temperature weather has continued to rise across the country. With the frequent release of high temperature warnings in various places, the strong demand for thermal coal brought by the peak electricity consumption this summer has attracted attention from many parties. In order to ensure the local supply of thermal coal, Henan Province has made a decision to require all coal mines to produce thermal coal for export. The pressure on the market to maintain supply has become prominent. According to the statistics of the business agency, as of July 2021, the price of coal in China has risen in varying degrees. Among them, thermal coal prices rose by 26%, coking coal prices rose by 39%, and coal prices hit a 10-year high! The price of coal has risen, and the electricity consumption of the whole society has continued to rise. The price of raw materials for thermal power generation has risen, power consumption has increased sharply, and the momentum of rising electricity prices has increased.

Continuous high temperature, the electricity load in various places keeps hitting new highs. Many places across the country have started to trial seasonal peak electricity prices and demand response electricity price policies. Anhui, Jiangsu and other places have implemented seasonal peak electricity prices; industrial electricity rationing has begun across the country, and Yunnan Province has begun to require some local metal producers to reduce electricity consumption for the second time in three months. Some zinc and tin smelters in Yunnan have received notices requesting a 25% reduction in electricity consumption. Many companies in Inner Mongolia, Ningxia and other places have restricted or even stopped production, and domestic power restrictions have been upgraded. The escalation of electricity curtailment has led to a decline in zinc production.

Overview and outlook

Affected by the continuous high temperature weather, the price of electricity has risen, the cost of zinc smelting enterprises has increased, and the momentum of zinc price rise has increased. Enterprises have curtailed electricity, and the output of zinc smelting enterprises is expected to decline. The zinc price has a greater momentum to rise. In general, the escalation of power restrictions has stimulated the zinc market to rise, and zinc prices are expected to fluctuate slightly in the future.

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

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