SunSirs: "Electricity Shortage" is Spreading around the World, Price of Zinc in the Chinese Market is Affected and Soaring to the Highest in 17 Years

Zinc prices skyrocketed after the Chinese National Day

The price of zinc continued to rise after the holiday. The price of zinc soared on the 14th. As of October 14, the price of zinc was RMB 2,5086.00/ton, a sharp increase of RMB 23,835/ton from the previous trading day, an increase of 5.25%; compared with the price of zinc on October 1 at the beginning of the month The price rose by RMB 22,686/ton, an increase of 10.58%. The shortage of electricity has increased the market’s concerns about the start of zinc smelters, which has stimulated the rise of zinc prices, and the domestic spot zinc price has gone straight to the highest price in 17 years.

LME zinc price hits a record high

The opening price of LME zinc on October 14 was US$3421.00/ton, and the closing price was US$3,503.60/ton, an increase of 2.41%; the highest price was US$3,637.50/ton, an increase of 6.33% from the opening price and an increase of about 30% from the beginning of this year. Today's zinc price is New high since 2007.

Shanghai zinc strong daily limit

On October 14, the main Shanghai zinc contract hit its daily limit, with an increase of 7.98%, and is now at 25,700 yuan/ton, a new high since March 2018.

Electricity rationing still remains

In late September, Guangdong, Shandong, Qinghai, Ningxia, Yunnan, Guangxi, Hunan, Anhui, Sichuan, Henan, Chongqing, Inner Mongolia and other places successively issued notices on power curtailment or peak-shifting power consumption. Most provinces in the country have encountered power curtailment. Zinc smelting is one of the main power-consuming industries. Power curtailment has a greater impact on the zinc smelting industry and the output of zinc smelting has decreased. Entering October, the three provinces of Guangxi, Yunnan, and Hunan, where power rationing was severe in September, were not alleviated. After Yunnan entered the dry season, the output of some smelters was expected to be lowered, and the power cuts in Jiangsu and Zhejiang increased. Some companies received a notice and started to open four holidays and three holidays. , The impact of limited electricity production in the zinc city has declined.

European electricity bills are soaring

The European Intercontinental Exchange data shows that compared with the price of about 6 euros in the middle of last year, the price of natural gas has soared more than 10 times recently, and the price has hit a record high. As energy prices have soared, so have European electricity prices. At present, the electricity price per MWh in the UK has risen to 285 pounds, a 700% increase over the same period, setting a record since 1999. Spain's electricity prices have tripled since last December, and Germany has risen by 50%. The European power crisis has further affected related industries. As a high-power-consuming industry, zinc smelting is affected by the surge in electricity prices, and the reduction of zinc smelting capacity is inevitable.

Three European smelters cut zinc output by 50%

According to foreign news on October 13, Nyrstar said that with the substantial increase in electricity costs and carbon emissions-related costs, it is no longer economically feasible to run the factory at full capacity. It will cut the zinc output of its three European smelters by 50% from Wednesday to cope with soaring electricity costs. Nyrstar belongs to the Trafigura Group and is one of the largest zinc metal producers in the world. It is understood that its three smelters have a total output of 700,000 tons, accounting for more than 5% of the world's share. A 50% reduction in production is equivalent to 2.5% of global zinc production. The news of drastically reducing the output of zinc smelters is too stimulating, and the zinc market supply is expected to plummet, stimulating zinc prices to skyrocket.

India's electricity crisis intensifies, zinc supply is expected to shrink

Due to insufficient coal supply, India has become the latest country facing a severe power crisis. According to data from the Indian power sector, as of early October, the average coal inventory of 135 thermal power plants in India was only 4 days, down from 13 days in early August. In the factories monitored daily, more than half of the stocks are less than three days old. The zinc smelting capacity in India accounts for 5% of the global zinc smelting capacity. The electricity crisis in India will inevitably affect zinc smelting, a large electricity consumer, and the zinc market is expected to intensify the reduction in zinc supply.

The fourth time the country dumped reserves

According to the No. 2 Announcement of the State Bureau of Grain and Material Reserves in 2021, it was decided to start the release of the fourth batch of 2021 national zinc reserves on October 9, and the fourth batch of sales totaled 50,000 tons. The introduction of the fourth batch of zinc reserves into the market has eased the supply of zinc in the short-term and increased the supply of zinc in the short-term.

Market summary

Affected by the skyrocketing global energy prices, power shortages have occurred one after another around the world, global power restrictions have continued, and zinc smelting, as a major electricity consumer, has increased the risk of limiting production and stopping production. The surge in European electricity prices has caused the cost of zinc smelting companies to soar, and European zinc smelting companies have reduced production by 50%, which is further intensified. In response to market concerns about zinc smelting companies’ reduction in output, the zinc market’s upward momentum has increased and the zinc market remains strong in the short term. In the medium and long term, global inflation has brought down expectations for downstream start-ups, the expected decline in zinc market demand, the lack of support for mid- to long-term zinc market rises, and the country has repeatedly dumped reserves to stabilize the zinc market, and zinc prices have limited room for skyrocketing. The price of zinc is expected to rise strongly in the short-term, and the price of zinc in the medium and long-term will fluctuate upwards slightly.

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

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